“Splash in the shallows” – family foundations testing the waters

Snow foundation

I am fascinated by private ancillary funds (PAFs) which are generally family foundations, so was very pleased to attend the Philanthropy Australia conference‘s session which highlighted the experiences of four family foundations at various stages of maturity, expertise and development.

Four panellists talked about how their foundations started, how they make decisions, operate and network – and highlighted the importance of the experience for their family and the personal satisfaction they get from having set up this giving structure.

The newest foundation discussed how the idea of a PAF had been suggested to them at a function four years ago, and was then brought up by their financial adviser six months after that.  Now, they are 18 months into their giving journey and have found a way to connect their family in the future and provide education outside the standard education system.  A key driver for them was their accountant, finding a mentor  (Stacey Thomas – who many years ago while  with the Potter Foundation ran an informal philanthropy pop quiz), and being introduced to collaborative giving and the network of philanthropy through the Impact100 giving circle in their state.

The oldest family foundation represented on the panel was set up 27 years ago, while the two relatively “intermediary ones” are comprised of people who describe themselves as always having been givers.

One was inspired by an article by Chris Cuffe, and decided they wanted to perpetuate their giving in a structured way which would involve both their children and extended family.  They employed someone else to do the setting up and compliance of the PAF and now focus on grantmaking and engaging with recipients, particularly around music education in disadvantaged schools.

The other “intermediary” PAF was set up in about 2005.  Their previous giving had been generous but ad hoc and tended to be reactive.  As their giving grew they knew they needed to be smarter about what they were doing, so again – having seen an article on Prescribed Private Funds (as they were at the time), they spoke to some key people in the field – Peter Winneke (who then was head of philanthropy at the then Myer Family Company – since merged with Mutual Trust), and John Emerson, one of the leading experts on tax/charitable law in Australia.

What struck me this early on in the conversation was the influence of mentors and people active in philanthropy encouraging others to participate, think more deeply and get more involved.  But I digress . . .

The impetus for setting up the family foundation or PAF was that both husband and wife had individual interests for their giving, but were both very keen to support the arts, environment and indigenous issues.  They felt that a structure might help them to be more clever givers – but this didn’t happen immediately – it evolved over time.

It seems that scattergun giving – or what one of the panel members called the “sunscreen” approach – putting it everywhere is one way of getting started before learning how to pull one’s interests together and to go deeper while still honouring the family’s interests (or the interests of the founder).

For one of the panellists, the turning point was meeting with Philanthropy Australia, Sue-Ann Wallace then at the Vincent Fairfax Family Foundation, and getting advice from Louise Walsh at (then) Artsupport. Again I am struck by the networks developed and the openness of people sharing their experiences and expertise. The panel reiterated the importance of finding key people in the field – even to the extent of inviting some to join their boards.

Founders of family foundations are keen to encourage the next generation to be philanthropic and for their family members to understand the responsibilities which go with running a foundation.  They recognise that they hold a limited amount of social capital, and want to drive their dollars as far as they can while also being able to respond quickly to funding opportunities.  Some don’t want to push their kids into it – as long as they are involved in giving at their own level.  One panellist was firmly of the view that their children should not be giving away “family money” before they have earned some of their own.

The level of structure and bureaucracy within family foundations and PAFs varies.  While there are the key elements of administration/compliance, investment and grantmaking, structure and flexibility both have their own appeal.  Some have very formal board meetings, others have Sunday afternoon chats or just meet to sign off on the annual accounts.

All the panellists talked about contributing more than dollars, by volunteering, and participating in experiences which enhance their understanding of the organisations and causes they choose to support. Many are  involved at board level with nonprofit organisations which further informs their giving and has led to a greater understanding of the need to fund operations or even infrastructure as opposed to projects.

They all talked about enjoying the collaborative nature of what they do and bringing other philanthropists and peers with them to leverage and grow their support.  Several work closely with Philanthropy Australia to find others interested in the areas they support.  Working with others also often alleviates some of the issues around due diligence – where foundations with staff can do some of the initial exploration of potential grantees.

A brief discussion of failures ensued – this was around jumping into areas or projects which were too complex,- rushing to distribute grants in a hurry before 30 June, or not having the dedication/commitment of a management team of a beneficiary organisation despite the eagerness of the project manager.

The panellists described their mission as:

  • more and better philanthropy
  • investing, empowering, educating (especially for their own children)
  • acknowledging that everyone can be a philanthropist because humans are kind.

While not all of the panellists are comfortable about being public with their giving (which is why I have not overtly named them here but you can see who they are in the conference program), they all believe in the importance of leadership and demonstrating what they are doing to bring more people along with them.  Some of them also noted that their philanthropy is more than them – they have a team of advisers, experts and mentors helping them.

Key tips for starting out are:

  • invest most in backing good leaders
  • make a start and be open minded
  • look for mentors
  • develop relationships with the people you fund
  • love learning
  • be curious (this deepens engagement and leads to better decisions)
  • collaborate
  • collaborate long-term.

Several questions from the floor covered whether the families were explicit about what they wanted to support when they set up, whether they do multi-year funding, why they chose the PAF structure rather than a sub-fund in a Public Ancillary Fund (PuAF), what expectations they have of the organisations they fund, and whether they felt PAFs should be able to give to PuAFs.

What do you think?  Might a family foundation/PAF be the right structure for your future giving?

ozphilanthropy was a guest of Philanthropy Australia at Day 1 of their 2018 conference.

About ozphilanthropy

#Philanthropy. #arts Posts by Sharon Nathani, PhD candidate at the Centre for Social Impact, Swinburne focussing on philanthropic funders of the arts. Sharon's study is supported through an Australian Government Research Training Program Scholarship.
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