Monday, April 28, 2008

More bang for their buck, by Stephanie Peatling - The Sydney Morning Herald - 25th April 2008

Australians are giving more than ever, but they are also asking more questions, writes Stephanie Peatling.

Throughout the 1980s and 1990s Michael Traill enjoyed the good life that comes with being a mover and shaker in the world of high finance.

As one of the founders of Macquarie Bank's private equity arm, Traill was doing well: "I had a good run of it, professionally and financially."

But the son of a man who dedicated his life to public education wanted more. "I wanted to do something that let me work in the community," Traill says.

In 2002 he took a year off from Macquarie Bank to run a new non-profit organisation, Social Ventures Australia, providing funding, mentoring and business expertise to not-for-profit organisations.

Today Traill and Social Ventures have raised $20 million from the top end of town to spend on a carefully selected group of programs including children in foster care, father-son mentoring and young indigenous leaders' programs.

The language of half-yearly reports, corporate governance models, succession planning and venture performance metrics caused some in the non-profit sector to at first raise a sceptical eyebrow. But chasing the money is what charities and non-profit groups have always done; it is just the methods that are changing.

"There's no question about organisations being businesses whether people want to hear that term or not. We are not-for-profit businesses," says Doug Humann, the chief executive of the conservation group Bush Heritage.

What Humann has noticed in his 11 years at the organisation is the information potential donors, particularly the large ones, seek. "Who are the board members? What is your financial situation? Where is your succession and organisational planning? These are the sharp questions people ask."

The Australian Tax Office endorses about 50,600 groups as charities and 21,900 as deductible gift recipients. About 18,100 are recognised as both.

It is less a case of charities using big business methods to raise money than charities becoming big businesses themselves, and all are chasing the billions of dollars given to charities each year.

In 2004 Australians were estimated to have given $11 billion to charities, not including the amount given to the Boxing Day tsunami appeals.

Of that figure business was responsible for $3.3 billion and gambling profits directed to charities accounted for $2 billion. About $5.7 billion was given by individuals.

A report by the Australian Centre for Philanthropy and Nonprofit Studies at the Queensland University of Technology combed through Tax Office figures, as well as those in the 2005 Giving Australia report on charities, to find 87 per cent of adults donated at least once a year with an average donation of $424. About 8.6 per cent said they donated more than $1100 but most of those gave less than $3000.

To put it in context Australians claimed donations to charities as tax deductions only slightly more than they did the cost of having an agent do their tax returns. But, according to Giving Australia, many people do not claim their donations because they think they are too small.

Although it is difficult to track donations, the data collected by researchers indicates more people are giving more as the years pass.

What the university report suggests is that although low- and middle-income people are giving more, Australia's richest people are becoming more stingy.

Its research shows that although the average household income of the rich has risen 36 per cent over the past decade, charitable giving in the same period rose only from 0.36 per cent to 0.45 per cent.

When compared with America, rich Australians do not come off well, donating less than 3 per cent of their net worth while Americans donated about 10 to 15 per cent.

And rich is not defined as people whose house has rocketed in value in recent times. It defined the very wealthy as people with assets in excess of $1.2 million apart from the family home, or with annual taxable personal incomes over $100,000.

It is these people who have the power to make the "transformational donations", as the report calls them, that can make or break a project.

"Above others, the affluent hold the key to non-profit ventures that really make a difference in the wider community. They have the wealth to make transformational donations. However, their influence exceeds financial support. They are opinion leaders and trend-setters for the rest of the community," the report found.

Traill is happy to say the rich should give more. After all, it's not as if there are not people with a lot of money sloshing about. Australia's richest 200 people are worth $128.6 billion.

But Traill is also happy to push the non-profit sector to work for its money.

"What is it you are doing? Are you trying to teach life skills to kids to help them find jobs or are you providing them with shelter and food? How many kids in your program have jobs? If they haven't found jobs, why not?"

The wealthy will give, Traill believes, if spoken to in their language of profit margins and outcomes.

"I spent 15 years in the private equity sector. If I'm a shareholder I want to know why I'm losing money," Traill says. And if that means dropping projects that have not performed then so be it.

Traill speaks of a change in the way non-profit groups do business from "cheque-book charity" to "strategic philanthropy".

Traill would rather work on getting one person to make a three-year commitment to give $500,000 or $1 million to a particular project than trying to dream up a fancy charity fund-raiser or relying on many small donations.

But not all in the non-profit sector are happy to place all their eggs in one basket.

Bush Heritage began as a community group in 1990 when the Greens senator Bob Brown used $50,000 from an environment prize he had won to buy and protect Tasmanian forest from the logging industry. It now owns and manages 29 reserves across Australia covering more than 720,000 hectares.

Last financial year it raised $12 million from a combination of government grants, large donations and smaller, ongoing contributions from its expanding membership group. Humann says although the large donations are vital the organisation could not survive without people who regularly donate smaller amounts of money.

"Our general supporter base includes people giving a couple of dollars a week to $200 a year. That amounted to $2 million last year … Those smaller amounts are about managing our day-to-day activities. It's providing for the work we do on the ground as well as the administrative backbone of the organisation," Humann says.

Both Humann and Traill say the super rich are less likely to talk about their philanthropic ventures than their American counterparts.

Perhaps it is Australians' inherent conservatism when it comes to talking about topics such as sex and money.

When it comes to the latter, the people with the money, ever mindful of committing the cardinal Australian sin of big-noting oneself, have been reticent to talk about their philanthropic ventures.

Both Traill and Humann say Australia could do with just one Bill Gates or Warren Buffett, someone who is not shy about standing up and shouting about how much money they are giving away and why they are doing it.

Humann has seen what can happen when someone is prepared to talk about giving large amounts of money.

In 2006 the entrepreneur David Thomas pledged $10 million over five years to conserve Australia's most threatened habitats and species on the proviso that the donation was matched by other families or individuals.

Bush Heritage has been a considerable beneficiary of Thomas's generosity. Humann says it is only in the past couple of years that his wealthy donors have felt more comfortable about speaking out.

While their public statements give others confidence to invest there is also a good dose of shaming others into acting similarly.

"People just need a bit of a push sometimes," he says.

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