Issue 69, December 2016

Philanthropy News

The magazine of Philanthropy New Zealand

In for the long haulKey lessons on high-engagement philanthropy

History does matter Boards should look to the past

Finding joy along the way Making a difference through giving

Funding overhead costs They're not an optional extra

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From the Chief ExecutiveTēnā koutou

It’s been a pleasure and a privilege to head up Philanthropy New Zealand over the past four years and see up close the incredible contribution the philanthropic sector makes in helping build a better world for all our communities.

It’s humbling to have been a part of this fantastic voyage of discovery as philanthropy moves forward with vibrancy and strength. There have been many highlights such as the greater collaboration between Government, business and philanthropy. We saw a social enterprise strategy for New Zealand initiated by Minister Goodhew and ably co-led by John McCarthy (Tindall Foundation) and Diana Suggate (Department of Internal Affairs). Our quarterly meetings between Government and philanthropy continue to improve collaboration and now include co-investment thanks to Murray Edridge (Ministry of Social Development) and Helen Topham (Ministry of Health). Our Business Giving Network continues to grow with support from Antony Welton and the Vodafone NZ Foundation.

Another highlight has been enabling thought leadership through the 2015 Philanthropy Summit which brings me to a very important point, don’t forget to register for the 2017 Summit! The theme is Innovate for Impact. Innovation is something we are seeing more and more of and is key to moving ahead. A great example of this is the concept development of an Impact Investment Fund for New Zealand that was realised with the support of Adrian Wimmers, KPMG, and a group of forward-thinking funders.

PNZ is all about enabling generosity and it’s the people with a generous spirit that make it possible — the collaborations and support, the shared expertise. As the proverb goes, he tangata, he tangata, he tangata — it is the people, the people, the people. On this note, I would like to say a huge thank you to you all, to PNZ’s members for your support, to our partners and sponsors, PNZ’s Board and Chair Kate Frykberg. I’d also like to acknowledge the amazing PNZ team. I will miss you all but know that PNZ is in a good place and will go from strength to strength with the high calibre Board, team and new CEO Tony Paine.

I wish you all the best for the future and as I will be heading up the new Te Papa Foundation, I’m still part the philanthropy family and look forward working with many of you in the future, so this is au revoir, not goodbye.

Contents3 News & Events

The latest news and events from Philanthropy New Zealand.

6 High engagement pays offFoundation North’s education initiative has provided valuable lessons about how to go about high-engagement philanthropy.

9 Power to the peoplePhilanthropy Summit 2017 keynote speaker embraces participatory grantmaking.

11 Finding joy along the wayUpper Hutt couple Chris and Warwick Dugdale believe giving is all about making life better for other people.

12 Impact investingThe concept of ‘doing good while doing well’ has room to grow in New Zealand.

14 Why funding administration makes senseGood systems are funded out of administration budgets.

Liz GibbsThe articles in Philanthropy News do not necessarily reflect the views of Philanthropy New Zealand.Magazine design and layout by Fortyfive Design Studio Ltd. This magazine is printed on sustainably sourced paper.

Cover Image: The Mutukaroa programme run by Sylvia Park Primary School. A Foundation North MPEI Project. See page 6.

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News & Events

Welcome New CEWe are delighted to announce the appointment of PNZ’s new Chief Executive Tony Paine.

Tony joins us mid-January 2017, following his role as Secretary General (CEO) at New Zealand Red Cross. He has extensive experience in not-for-profit leadership and management as well as

grantmaking, governance and government relations.Working in the health, social service and cultural

sectors in New Zealand for over 30 years, Tony’s career began as a psychiatric social worker and includes work with the NZ AIDS Foundation, the Christchurch Methodist Mission, CEO of the Comcare Trust, the Christchurch Arts Centre and Victim Support NZ. He has also served on the Board of Housing New Zealand Corporation for five years.

"With many years' experience in the community sector, I know first-hand what a powerful force good philanthropy is. I'm really looking forward to joining the great team at PNZ and continuing our support of the sector. Effective, generous philanthropy is essential as we all work to meet the challenges of building strong and connected communities across Aotearoa New Zealand," says Tony.

Paine will be taking over from CE Liz Gibbs who is leaving to head up the new Te Papa Foundation.

We are very sad to see Liz leave, she has done an excellent job as CE of PNZ and has built the organisation considerably over the last four years. We wish her well in her new role.

REGISTER NOWNZ’s largest gathering of leaders in Philanthropy

Held at Te Papa, Philanthropy Summit 2017: Innovate for Impact is bringing together global and local thought leaders from philanthropy, business, iwi, government, investment and the community sector for the two- day summit.

Focussing on global and local examples of innovation in philanthropy, the Summit will provide opportunities for attendees to learn best practice and hear success stories, first-hand, around innovation in the sector, from community engagement to investment, advocacy to technology.

For more information and to register, go to www.philanthropy.org.nz/events

PNZ Board update Following our AGM on 1 December, we welcome newly elected Chair Sandra Kai Fong and Deputy Chair Terri Eggleton.

Kate Frykberg has stepped down as Chair of the Board as she has completed three three-year terms — the maximum allowed under PNZ’s constitution. We wish Kate well and are hugely grateful for her wisdom, expertise and support these past 12 years.

As the term ends, we also farewell two Board members Lani Evans and Kim McWilliams and welcome to the Board, Barry Baker and Ken Whitney.

For more information and bios on the PNZ Board, go to www.philanthropy.org.nz/our-board

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The Waikato Vital Signs report, was released in full in mid-October, identifies three top priorities for action in the Waikato region:

1. Working together to improve community connectedness.

2. Developing better education and pathways for youth.

3. Solving problems with affordability, availability and quality of housing.

In the lead-up to the release the organisations involved have been publishing a series of infographic panels highlighting different aspects of the report.

Vital Signs is an international movement that was first started by the Toronto Community Foundation in 2001. It is now a valuable tool for community foundations around the world, including the Acorn Foundation in Tauranga which published New Zealand’s first Vital Signs reports in March 2015.

The Waikato report was developed following four open town-hall style brainstorming sessions in Hamilton city, Waikato and the Matamata-Piako districts, as well four invitation-only sessions with youth and Iwi Māori. More than 400 people took part in the sessions.

Collaborative effort for Waikato Vital Signs reportMomentum Waikato has joined forces with six other Waikato philanthropic trusts and the University of Waikato to develop New Zealand’s second Vital Signs report — a “health check” of the local community that will help guide funding decisions to make sure they meet local needs and drive community conversations towards action around what matters most.

Momentum Waikato Chief Executive Cheryl Reynolds says the response they had “has set a positive benchmark for other community foundations around the world.”

“Being part of this innovative, pioneering project is something local people can be really proud has happened in our community.”

The other trusts involved in the project are D.V. Bryant Trust, NAR Foundation, Ngati Haua Iwi Trust, Trust Waikato, WEL Energy Trust, and Waikato-Tainui.

For more information go to www.momentumwaikato.nz

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News & Events

UPCOMING EVENTS MarchWed 1 Youth Funders’ Network

Tue 21 Environment Funders’ Network

Wed 22 Responsible Investment Masterclass

May8 – 9 International Funders for

Indigenous Peoples Pacific regional hui

10 – 12 Philanthropy Summit 2017: Innovate for Impact

Please see Philanthropy.org.nz/events for more information and registration.

Hospitable to the coreFor long-time Wellington restauranteur Steve Logan being hospitable is second nature. The co-founder of celebrated fine-dining restaurant Logan Brown has spent most of his life in the hospitality industry.

But many people don’t realise that Steve is hospitable in more than just the traditional sense of providing a fantastic dining experience. He also gives generous support to charitable organisations throughout New Zealand — anything from providing free meals as raffle prizes for school fundraisers to (as he and his executive chef Shaun Clouston did recently) cooking for 90 people at an event in Hawkes Bay to raise money for the local branch of the Brain Injury Association.

For Steve, giving back is part and parcel of the job, though it can be very time-consuming and for smaller contributions such as raffle prizes he now asks people to apply through his website rather than talking to them individually.

“I keep telling myself I have to start saying ‘no’ — but we just really enjoy backing people who want to do something good. It’s part of our values; I believe what goes around comes around.”

Shaun Clouston and Steve Logan

Kiwi charities struggle to find regular fundingNew Zealand charities are struggling more than their Australian counterparts when it comes to finding regular sources of funding, according to the latest Grant Thornton Not-for-Profit Sector Survey.

A third of the 305 New Zealand charities that took part in the survey said they were finding it increasingly difficult to find consistent and regular sources of funding, compared with just 16% of the 51 Australian respondents.

The figure for Kiwi organisations is up from 25% the last time the two-yearly survey was carried out in 2013.

For respondents on both sides of the Tasman, funding continues to be the most prominent issue facing their organisations, with 36% saying they were unable to plan beyond a year under their current funding arrangements — a small improvement on the results of the previous survey (39%). More than 80% said they were looking for new and innovative funding opportunities though these were increasingly difficult to find. Their primary sources of funding continued to be government grants or contracts and “other grants and scholarships”.

The survey found that not-for-profits were also increasingly aware of the risks they were exposed to as the sector undergoes unprecedented change, as well as the challenge of technology and concerns about retaining staff and volunteers.

Find the full report: www.grantthornton.co.nz

Attendees at our Governance and Investment workshops in October were able to enjoy Steve’s hospitality at a specially priced dinner at Logan Brown. Many thanks to Steve for the generous discount.

For more information go to www.momentumwaikato.nz

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Foundation North took a leap into the unknown when, in 2006, its trustees agreed to commit $20 million to fund a five-year, high-engagement project to help improve low Māori and Pacific education achievement in Auckland and Northland.

As Foundation North Chief Executive Jenny Gill points out, the sheer size of the allocation combined with the length of the project made it completely different from anything the Foundation had done before.

“Five years was hugely revolutionary at the time — we’d never committed to anything for longer than three years.”

Even more revolutionary was the fact that Foundation North (then the ASB Community Trust) had no idea how it would spend the $20m. Instead, it planned to get Māori and Pacific communities to come up with their

own “game-changing” solutions to low educational achievement.

“We genuinely didn’t know how it would play out,” says Jenny. “We believed that lots of top-down initiatives had tried and failed, and we also believed that communities would have ideas about what they wanted for their children.”

Not surprisingly, some trustees were sceptical about the proposal.

“It didn’t sit well with me — I thought the whole thing was idiocy,” recalled one of them recently.

Fortunately, the money had already been committed before the Global Financial Crisis hit in 2008, which provided reassurance to trustees concerned the Foundation might no longer be able to afford such an ambitious project. Even more importantly, early results from what

eventually became known as the Māori and Pacific Education Initiative (MPEI) were extremely encouraging. As the once-sceptical trustee observed, it very quickly became clear that the MPEI was “making young people better and also building the administration capacity of organisations”.

With the exception of one ongoing project the MPEI finished in June and Foundation North has now published a series of reports evaluating the initiative and providing suggestions for other funders keen to embark high-engagement projects, including a set of five principles to help guide the process (see box to right).

As one of the reports points out,

High-engagement initiative pays offFoundation North’s ambitious Māori and Pacific Education Initiative has provided valuable lessons about how to go about high-engagement philanthropy.

Left:

Above: Foundation North CE Jenny Gill. Bottom: The Leadership Academy of A Company, one of Foundation North's MPEI projects. Photo courtesy of He Puna Marama Trust.

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high-engagement philanthropy isn’t for everyone. “It requires a considerable commitment of time and resource on both sides, and it is a completely different relationship to the one many non-profit organisations are used to having with funders.”

The same report also stresses the central importance of the ongoing mentoring and support provided to each grantee organisation by Foundation North staff, in particular the support provided by Project Manager Moi Becroft and her colleague Annie Johnson.

“Moi and Annie were the critical ‘cultural fit’ between the projects and the Foundation over the course of the initiative.”

Their full-time positions were funded separately by Foundation North, although the cost of the extensive evaluation carried out by the Kinnect Group came out of the original $20m. Foundation North has subsequently established an in-house evaluation team as part of the Centre for Social Impact established in 2014.

Not everything went according to plan. Funding to one organisation stopped 18 months into the five-year project when it became clear they weren’t meeting agreed milestones. Funding for another finished after two years, while a third never received any funding at all after they tried to renegotiate the terms of their grant.

But Jenny says all nine projects that received the full five years’ worth of funding have been successful and six have been game-changing in exactly the way the Foundation had hoped.

The latter group includes the initiative’s largest grantee, the Leadership Academy of A Company, a residential programme in Whangarei for future male Māori leaders which

received a total of $5m. Boys who have graduated from the Academy have significantly better NCEA results than other Māori boys in their region and many have gone on to tertiary study.

“We’re really, really proud of the Leadership Academy because it shows you can turn Māori boys’ education achievement around,” says Jenny.

In Auckland, the Mutukaroa School and Community Learning Partnership developed at Sylvia Park School has been so successful that the Ministry of Education has provided funding to introduce it for years 1 to 3 students at more than 100 primary schools.

Jenny says having a clear focus right from the start was a major factor in its success. So did the fact that the trustees and staff who helped start the process 10 years ago — including herself and then-Chair (now Foundation North kaumātua) Kevin Prime — were still there when it finished.

“We told our first group of grantees that we were going to last the distance, and we did.”

What started out as a bold experiment has now become an integral part of Foundation North’s grantmaking programme, although it has tweaked its multi-year, high-engagement funding as a result of the MPEI experience.

It no longer fully funds projects, for example, but instead helps grantees find additional sources of funding. It also looks at a grantee’s organisational abilities much earlier in the process and provides mentoring in areas such as governance and financial management to help bring them up to speed.

“We do that much earlier and we also do it more intensely.”

Five key lessons from the MPEIEvaluation and reflection has been a central part of the MPEI. The results of this evaluation has been used to identify a set of principles that can be used by other funders keen to embark on a similar high-engagement process.

1. It’s all about relationshipsThis principle lies at the heart of engaged philanthropy — building good relationships is the foundation for everything that follows.

2. Our communities can create the change they wantIt can be hard to do, but it’s vital to recognise that communities have the knowledge, experience practical wisdom and expertise to solve their own problems.

3. It’s about walking alongside each other and thinking togetherThe journey won’t always be easy but it’s only possible if everyone walks together and shares the job of sorting out what to do next.

4. Expect change and be prepared to be courageousEngaged philanthropy can be challenging and ambiguous, but you need to resist the temptation to follow old patterns of behaviour.

5. Ensure reflective and evaluative thinking is built in from the startReflection and evaluation is not an add-on when it comes to engaged philanthropy — it’s fundamental to the process. It’s also important not to be too rigid about how you will evaluate — it needs to be done to fit the context.

The Mutukaroa programme run by Sylvia Park Primary School.

For more info go to FoundationNorth.org.nz

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Giving New Zealand update: per-capita giving

Aucklanders received a total of $175 each from family, individual, community and energy trusts during 2014, compared with just $58 per person in Canterbury according to a new analysis of the data collected as part of last year’s Giving New Zealand report.

We asked BERL to break down some of the data to provide an indication of per-capita giving in different regions — the first time we have obtained that figure (see Graph 1).

The results provide an interesting snapshot of trust and foundation giving though it is important to note that they do not include giving by gaming societies, licencing trusts or the Lottery Grants Board, which between them accounted for 45% ($533m) of all trust and foundation giving in 2014.

However, the results do highlight some interesting differences in giving between the regions. Wellington, for example (which includes the Wairarapa and the Kapiti Coast), had the highest per-capita funding from family and individual trusts at $98 for each person. But Wellingtonians received only another $3 each from community and energy trusts, making total per-capita giving in the region the fourth lowest in the country.

Aucklanders, North Islanders living outside the Auckland and Wellington regions, and South Islanders living outside the Canterbury region, on the other hand, all received significantly

Crunching the recent Giving New Zealand data has provided an interesting snapshot of trust and foundation giving.

more from community and energy trusts — around $90 each — making them the regions with the highest per-capita giving in 2014.

We also asked BERL to provide a snapshot of the sectors that received funding during 2014 (see Graph 2). These show that 24% of giving went

to social services, followed by 22% for health and medical research and 21% for education. These figures only represent giving by family, individual and community trusts — they do not include giving by energy trusts, licencing trusts, gaming machine societies or the Lottery Grants Board.

Graph 2 Percentage of giving by sector 2014 (family, individual and community trusts)

30%

25%

20%

15%

10%

5%

0Education Health

and medical research

Social services

International aid

The environment

Religious activities

OtherCulture and recreation

Graph 1 Per capita giving by region 2014 (family, individual, community and energy trusts)

$ pe

r cap

ita g

iving

Auckland$

$50

$100

$150

$200

Wellington Other North Island

Canterbury Other South Island

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Power to the peopleNow that she’s tried participatory grantmaking, Philanthropy Summit 2017 keynote speaker Katy Love would never go back to the old way of doing things.

Katy Love, Director of Community Resources at the Wikimedia Foundation.

Katy Love had to learn a completelydifferent way of working when shejoined the Wikimedia Foundation — the organisation that supports and hosts Wikipedia and its sisterWikimedia sites — as a seniorprogramme officer in 2013. Today,Katy oversees the grantmakingteam at the Foundation, a nonprofitdedicated to empowering andengaging people around the worldto share in free knowledge.

In line with Wikimedia’s principles of openness, transparency and sharing power, the Foundation is committed to participatory grantmaking. That means that rather than a handful of grants officers beavering away behind the scenes and coming up with recommendations for the board to approve, the whole process is carried out in public, with a community representative group making the largest grant decisions.

Grant proposals (most of which come from volunteer Wikipedia editors or affiliated organisations with a similar mission) are workshopped on public wikis. The larger Wikimedia community around the world also gets to weigh in, ask questions, and offer feedback about which proposals to fund and how much funding to offer.

In addition, the Foundation has four grantmaking committees made up of more than 50 voluntary members, most of whom are actively involved in Wikimedia projects. They work with Katy — the Foundation’s Director of Community Resources — and the rest of her team to sift through the

feedback, analyse proposals and make funding recommendations.

For Katy, who had previously worked in a more traditional grants officer role, the new approach brought some challenges. “The decisions the committees make look different, and they feel different. They’re created with a different process which requires a professional grantmaker to take a step back and provide data, support, and structure, but leave the decision to the representatives from the community. And at first, placing so much trust in

others can be scary.” Just as scary — at least initially — was the very public nature of the process; grant proposals sometimes get completely changed as a result of the online workshopping they receive.

“It can be very painful to publically declare the strengths and weaknesses of the proposals of people you know and care for, but it’s a really critical part of the process because the idea is to learn and iterate and get feedback.”

She’s also had to learn to accept that committee members won’t always make the decisions she would make herself.

"Sometimes a grant is made for lower or higher amounts than I would have made it. But when that happens, I fully respect the decisions the committees make. I believe they collectively make a stronger, more effective, and more community respected decision than I would as an individual." These

days, Katy is a fan of participatory grantmaking, although she recognises it can be challenging to implement the model all at once. That’s reflected in the fact that the Wikimedia Foundation, which by US standards has a relatively

modest grantmaking budget of $7 million a year, is thought to be the largest participatory grantmaker in the world.

However, Katy says an increasing number of traditional grantmakers are taking an interest in this new way of working, partly because of the growing appetite for greater transparency about decision-making of all kinds. Along with other participatory funders, Katy is keen to develop resources and tools on how the process works for the Foundation.

“There are lots of ways to do this work, but for the Wikimedia Foundation it is absolutely critical that we make grants in a way that reflects our ethos,” she says. “It’s not just about the financial decisions, it’s about how those decisions are made, and who is represented in those decisions. I really can’t imagine making funding decisions any other way.

“The idea is to learn and iterate and get feedback.”

You can hear Katy Love talking about participatory grantmaking at the Philanthropy Summit 2017, Wellington, 10 to 12 May.

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should use 100% of donations for charitable purposes is so widespread that the Australian Charities And Not-for-Profits Commission recently published guidelines to explain why that’s not possible.

The commission pointed out that businesses and government agencies also incur administration costs. So do grantmaking organisations. John Prendergast, CEO of the Community Trust of Southland, says it’s vital for trusts and foundations to invest in their grantmaking machinery.

“Too often in New Zealand, we try to make a virtue out of operating on the smell of an oily rag, but it’s not good for grantseekers if that means you get ineffective grantmaking.”

On average community trusts spend the equivalent of 0.6% of their asset base on administration each year. That may sound modest but given the size of their assets it can be a sizeable amount.

New Zealand’s 14 community foundations keep administration costs to the equivalent of 1% of their asset base. However, Nicky Wilkins, General Manager of the Acorn Foundation, says some also receive donations specifically for administration.

When the Spark Foundation announced that it was going to start charging a 5% administration fee on the amount raised by fundraisers through its popular crowdfunding website, Givealittle, it got a predictably negative response.

“It will cause stress and worry to families going through difficult times,” one user told Stuff in an article that also pointed out that had the fee been in place during this year’s $2.28m campaign to “buy back” a beach at Awaroa Inlet the campaigners would have paid $114,000 for administration.

Givealittle Chief Giving Officer Tom Beyer says some people even assumed the Foundation was going to pocket the money rather than using it to help pay the rising costs of running the website — in particular third-party costs such as credit card and payment processing fees.

“We thought very hard about how we could achieve cost sustainability and in the end decided that charging an administration fee was the best way of ensuring we could keep growth happening.”

Public concerns about administration costs in the not-for-profit world aren’t new. In fact, the belief that charities

“I don’t have any qualms about asking for those donations because people have to understand that we’re running a professional operation and we offer professional services, and you need money to pay for that.”

Recent research by Philanthropy Australia found that endowment-based trusts spend an average of 2% of their assets on administration, while some British foundations John visited while he was on a Winston Churchill Fellowship last year spent as much as 6%.

He says getting the amount right is a bit of a balancing act. “You don’t want to be frivolous and spend precious dollars on administration, but also you don’t want to be silly about it by spending nothing and ending up with inefficient processes and practices.”

Givealittle is in a different position because it does not have an asset base generating interest to help pay for administration. Rather, as Tom points out, it is more like an e-commerce platform where money is transferred in and out, attracting third-party fees in the process.

The cost of those third-party fees has risen dramatically as donations have increased from $7.4m in 2014 to $21.4m last year. The Spark Foundation has also had to employ more staff to help monitor and run the website.

And while the new 5% administration fee, introduced on September 1, has caused a few grumbles, it’s lower than other similar sites overseas. Donors can also choose to make a “top-up” donation to help meet the fundraiser’s administration costs — or corporate sponsors could step in to the fill the breach.

“If fundraisers can get a third party to pay the administration costs, we’re happy to sing that from the rooftops,” says Tom.

The cost of grantmakingThey say you can’t make money without spending it, and the same is true when it comes to giving money away. Being a successful grantmaker has costs attached to it.

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When Chris Dugdale’s husband Warwick describes her as an organiser he’s not kidding.

Chris, who with Warwick runs the Dugdale Charitable Trust, is a formidable organiser who has spent many years harnessing her natural skills as a social entrepreneur to make life better for many people in Wellington and the Wairarapa.

She’s the brains behind a series of property developments all of which have had an underlying charitable purpose, starting with what was effectively a social housing scheme — “though we’d never heard of that term” — in Upper Hutt in 2002.

The couple owned 12 rental properties on a one-hectare site which they leased at below-market rents to provide families with warm, dry, safe homes and a supportive community.

“We offered to help people with budgeting, taught them gardening, helped with the children — we became like surrogate grandparents. We gave a special welcome to single parents and families from overseas.”

Running a small social housing community might have been enough for some people. But not for Chris, who made her first foray into giving as a child in Britain in the 1950s.

“I stood at my gate telling everyone they had to buy glasses of lemonade to raise money for Hungarian refugees,” she recalls. “For me it’s not just about raising money — it’s about living your life not just for yourself but doing what you can for others.”

In 2011, she added another

housing-related activity to her social enterprise portfolio — building and selling seven “charity houses” in the Wairarapa area. Built in partnership with the Universal College of Learning (UCOL) and several different building companies, the seven houses raised a total of $270,000, all of which was donated to charity.

At the same time the couple set up the Dugdale Charitable Trust to create a vehicle for their giving. They were inspired by Philanthropy New Zealand Board Chair Kate Frykberg — then Executive Director of the Todd Foundation, who Chris consulted for advice.

She was particularly struck by something Kate said about her own life mission which was “to learn and to grow, to make a difference and to find joy along the way”.

“Kate inspired me to set up our own charitable trust which we started with $10 and a goal of building the equity to $500,000.”

Two years ago, Warwick and Chris sold their 12 rental houses and used the proceeds to design and build — and subsequently sell — six

high-quality retirement homes. They used the profit from this and several smaller projects to buy four shops in a suburban shopping centre. The rent from them now provides an ongoing income stream so the trust can continue to make grants and donations into the future.

"The trust is a vehicle that has allowed many people to participate in fundraising, and thanks to the generosity of many individuals and companies we reached our goal of $500,000 in equity within four years.”

The Dugdales take an eclectic approach to their grantmaking. Rather than calling for applications they prefer to fund projects that strike a chord with them. “If we hear about something and it inspires us, we follow it up.”

They have given grants to mainstream charities such as the Life Flight Trust, Hospice Wairarapa and Plunket, as well as to niche projects such as helping Dalefield School in Carterton reline their swimming pool and purchasing a new rescue boat for Riversdale Surf Life Saving Club.

“We like to donate to projects where someone probably couldn’t do something if we didn’t help them. That gives us the satisfaction to keep going,” says Chris.

Finding joy along the way

Warwick and Chris Dugdale at their home in Upper Hutt.

“It’s about living your life not just for yourself but doing what you can for others.”

For Upper Hutt couple Chris and Warwick Dugdale, giving is all about making life better for other people.

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Impact Investing The concept of ‘doing good while doing well’ has room to grow in New Zealand writes John Prendergast.

philanthropic giving — $1.4 billion is a lot of money, and it undoubtedly does a lot of good, but $28 billion is an even bigger, and better, amount of money. What’s the relevance of this $28 billion figure? Well, that’s the amount of assets that it is estimated reside on the balance sheets of New Zealand trusts and foundations. These $28 billion of assets are invested by trusts and foundations, predominantly in what might be called the traditional asset classes: cash, bonds, property, private equity, listed shares, and a little further out the risk spectrum smaller allocations to venture capital, and other more “alternative” asset classes.

These $28 billion of assets are deployed by trusts and foundations almost exclusively in search of financial returns, and those financial investment returns then each year replenish trusts’ and foundations’ grants budgets, allowing them to make the $1.4 billion of grants to support organisations doing good in New Zealand communities.

Every investor wants their investments to make an impact. Usually, the impact sought is a positive contribution to the investor’s bank balance! But increasingly, investors are looking for more than simply financial return.

Impact investing is the latest term to enter the investment lexicon. It refers not only to positive financial impact, but also positive impact from a social and/or environmental perspective.

This has particular relevance for philanthropic investors — those trusts and foundations, and individuals too — who look to do good through their grants budgets. This is because increasingly philanthropic givers are looking to do good through the use of their balance sheets as well. Philanthropy New Zealand’s most recent research into the amount of philanthropic giving in New Zealand found that our trusts and foundations in the 2014 year granted $1.4 billion to good causes.

This places New Zealand third in the world in terms of our level of

In recent years, several trusts and foundations have started thinking a bit more laterally as to how they invest their capital. Might they, for instance, invest some part of their portfolio in a way that generates not only the financial return they need, but also creates positive social and/ or environmental impacts as well? And through investing in New Zealand’s growing social enterprise market, they are finding that, actually, yes they can.

Impact investing isn’t brand new to New Zealand, but it’s fair to say that the uptake of investment for impact by philanthropic trusts and foundations in our part of the world has been a little behind that of other countries, notably the USA, and especially the UK. The UK has benefitted over the past decade from government initiatives which have consciously aimed to grow the social investment ecosystem.

Entities such as Big Society Capital, and more recently the Access Foundation, and in Scotland Social Investment Scotland, have been

13Philanthropy News | Issue 69

added to the UK impact investing infrastructure, to sit alongside longer-established impact investment infrastructures such as Triodos Bank and the Charities Aid Foundation. These entities exist solely to support, encourage and facilitate impact investing and to grow the impact investing market.

The advent of these organisations has begun to change the face of the

not-for-profit sector in the UK, and the term ‘not-for-profit’ organisation possibly provides a hint to what’s seen as a flaw in our current philanthropic model in New Zealand. Trusts and foundations provide ‘not-for-profit’ organisations with an ongoing stream of (usually) annual grants, which sit alongside an ongoing stream of (usually) annual contracts from government agencies such as MSD; and by their very nature these annual gifts and contracts lock not-for-profit organisations into always being, well, not-for-profit.

‘Surplus’ and ‘reserves’ seem almost like dirty words, words which tend not to feature in our not-for-profit lexicon. As these recipient organisations are never given any ability to build their capital platform, never supported to grow their balance sheets to a point where maybe, just maybe, they might have the ability to begin looking further ahead than

one year. They might be supported to grow their ability to cope with financial instruments such as loans, bonds, or even equity, which provides them with much more scope for doing good in our communities than an annual diet of grants and contracts can ever do.

If New Zealand’s trusts and foundations decided to allocate even a modest amount, say 5% of their $28 billion investment balance sheets

to impact investing, that would see a new $1.4 billion of investment capital made available to our ‘not-for-profits’, to sit alongside the $1.4 billion of grants we currently give them each year.

Impact investing has suffered from the perception that it means some sort of soft and fluffy form of investment, but that needn’t be the case. Impact investments can readily be structured in a way that generates a totally acceptable financial return, while also generating social and environmental impacts.

How might we shift the paradigm in New Zealand?

• Government signalling and support is critical. Could we have our own version of Big Society Capital in New Zealand please? (It needn’t be as large as BSC, Little Society Capital would be adequate for New Zealand).

Impact investing has suffered from the perception that it means some sort of soft and fluffy form of investment, but that needn’t be the case.

• Trusts and foundations could consciously consider impact investing possibilities, and explore how much of their investment portfolios they might reasonably allocate to impact investing.

• Investment advisors could be encouraged to start thinking, and advising their trust and foundation clients, more actively about impact investment opportunities.

• Fund managers could develop impact investment products for trusts and foundation clients.

• For impact investing to flourish in New Zealand, there is a need not only for investors, but equally there is a need for a supported and vibrant social enterprise market. This too requires conscious effort and support.

Grants will always remain as the bread and butter support of our not-for-profits. Not everything is a market, but the philanthropic sector’s support for New Zealand communities could, I believe, be significantly accelerated and enhanced if we were to start thinking of our balance sheets as a tool for good, alongside our annual grants budgets.

John Prendergast is CEO of The Community Trust of Southland. He was a recipient of a Winston Churchill Fellowship in 2015 where he focussed on the leadership of philanthropic trusts and the development and use of social finance such social loans or bonds in the UK.

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The first two concerns are relatively easily managed through good communication between both sides of the for-purpose partnership. It’s always a funder’s prerogative to stipulate any ‘no go’ areas for administration funding, and charities are generally accommodating of a donor’s wishes.

As for control and impact of untied funding, it’s good practice to develop a mutually agreed understanding of the metrics that will be used to chart progress over time — preferably before the funding is given.

The third objection is perhaps the most pervasive, despite the fact that Australia has no clear definitions around which of a charity’s costs should be considered ‘service-related’

and which should be understood as ‘administration’.

As such, information about charitable administrative costs is not comparable between organisations and can feed unfounded assumptions — namely: that those charities with higher administration costs are somehow less worthy than

those with lower overheads.Intuitively, we all know that this

premise is unsound.Adapting the commercial adage,

“You have to spend money to make money”, in the for-purpose world we recognise that good services are founded on good systems. And good systems are funded out of administration budgets, which may scare off some funders.

Good systems are funded out of administration budgets, which may scare off some funders.

Why funding administration makes sense“I’m not interested in funding administration.” You often hear these words at trustee meetings, but what do they really mean? Fiona Higgins from Australian Philanthropic Services decodes the debate and takes an incisive look at why some of the greatest philanthropic impact flows from unrestricted funding.

In my experience, the words “I’m not interested in funding administration” can be code for:

Objection 1. I am loath to fund certain elements of charitable administration, especially marketing and communications, fundraising collateral (appeals, direct mail, merchandise catalogues) and glitzy, high-cost events that might end up on the front page of The Australian newspaper.

Objection 2. I’m worried about control and impact. If I give an organisation an unrestricted grant, how will I know how it’s spent, and to what effect? Aren’t I just contributing to consolidated revenue?

Objection 3. I don’t want to fund indirect charity costs — I only want to fund direct service provision.

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Yet, if those same administration-averse funders are asked “Are you prepared to help move a well-run organisation from good to great?” the answer is usually a resounding yes!

Time to talk capacityWhatever the size or scope of our grantmaking, perhaps it’s time to stop focusing on administration costs and start paying attention instead to an organisation’s capacity: the unique blend of leadership, governance and programmes that enable the organisation to deliver social impact, as well as the associated costs.

It’s an idea echoed by Sarah Davies, CEO of Philanthropy Australia, who, at the Generosity Forum in May 2016, called on Australian philanthropic foundations to move away from the prevailing project-based funding model, and instead embrace capacity-building and unrestricted funding.

Sarah’s suggestion is grounded in a growing body of evidence that shows low administration costs do not necessarily signal that a charity is good. In fact, it can indicate the converse.

So what, in practical terms, does that mean for funders?

It doesn’t mean abandoning a forensic review of a charity’s financials — funders can, and should, interrogate an organisation’s revenue and fundraising model, the diversity (or lack thereof) of its funding base and its plan for sustainability.

Drilling down into the ‘cost of fundraising’ component of administration costs is also appropriate — how much is the organisation spending on black-

tie balls, capital drive campaigns, or telemarketers?

But equally, if you already have a funding partner with a strong track record of results, and with fair and reasonable administration costs that support well-run programs, untied funding can be an act of good faith in that organisation, a form of enlightened generosity.

Some of the greatest philanthropic impact can occur when funding the most mundane overheads.Consider, for example, the funding of:

1. TalentLonger-term commitments (three to five years of funding) that will help an organisation move the right people into an organisation — at the executive, program and board level — and sometimes, awkwardly, to move the wrong people out.

2. Sustainability planning and implementationFunding an external consultant (there’s a word that can send many a funder running from the room!) to spend time with an organisation, run a diagnostic on its financial and fundraising model, then brainstorm alternative revenue strategies. Sometimes all it takes is an external perspective to start shifting habituated ways of thinking and doing within an organisation.

A word of warning: it’s best to commit to both the planning AND implementation of this kind of review. It’s no good getting a consultant to come into an organisation, tell everyone how to start doing things

better, deliver a slick strategy presentation, then leave.

Find (and fund) a consultant that’s prepared to both design and deliver the review, then roll up their sleeves for the implementation phase, too.

3. SystemsThere’s nothing more important to organisational longevity than strong business processes and systems, for finance, IT and HR — and there’s nothing less sexy to fund.

While individual donors are likely to be unmoved by the importance of data integrity, to an organisation working in an area such as youth suicide prevention, philanthropic funding is uniquely placed to help that organisation achieve its data dream, thus enabling it to scale its programs.

In short, by funding basic administration costs, philanthropic funders can liberate an organisation to do more of what it already does well. You back the organisation, not the project; you fund systemically rather than sporadically; you contribute to the organisation’s longevity and sustainability.

It could be your greatest gift ever.

Fiona Higgins is Senior Manager, Grantmaking & Evaluation at Australian Philanthropic Services, a leading provider of PAF establishment and grantmaking services in Australia. This article was originally published in Generosity magazine: www.generositymag.com.au

Thank you to our key sponsors Philanthropy New Zealand Board members

Chair Sandra Kai Fong, Rotorua Energy Charitable TrustDeputy Chair Terri Eggleton, BayTrustMembers Barry Baker (Grant Thornton), Annette Culpan (Perpetual Guardian), Murray Jones (Dove Charitable Trust), Rongo Kirkwood (Trust Waikato), Jennifer Walsh (Te Rūnanga o Ngāi Tahu), Ken Whitney (Chisholm Whitney Trust)

Philanthropy New Zealand is the hub of philanthropy in Aotearoa New Zealand. We provide thought leadership and practical help for everyone with an interest in giving to make the world a better place. Our members include private philanthropists; family, community and corporate foundations; and iwi and community trusts.

We also have a community membership category for not-for-profit organisations that deliver services into the community.

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