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THE GRANT MAKING BLOG

Making a Difference – Best Practices in Philanthropy

By Kate Caldecott

 

AIGM as published by AIGM

The dual nature of philanthropy reminds me of the Starfish Story, in which a man walked along a beach, seeing thousands of stranded starfish washed up by the outgoing tide. The man considered picking up the starfish and returning them to the sea, but there were too many. He knew he could not save them all. He then saw a child who was frantically throwing starfish back into the sea.

“You’re wasting your time,” the man explained. “You can’t possibly save them all so what does it matter?”

 

The child picked up another starfish and tossed it back into the water explaining, “It matters to this one.”

 

As grantmakers, we invest in services that we believe will, at the very least, matter to the beneficiaries who receives them. But we are challenged to do more. The greater role of philanthropy is to try to “change the tides” so that fewer of our society’s most vulnerable members end up washed up on the shore in the first place. To that end, it would serve us well to identify and follow best practices in philanthropy.

 

Criteria for Philanthropy at its Best

 

The U.S.-based National Committee for Responsive Philanthropy recently released a report entitled Criteria for Philanthropy at its Best that invites grantmakers to consider whether or not they are making the most impact possible. The report lays out ten benchmarks, under four core categories, defining best practices in philanthropy:

VALUES … contributing to a strong, participatory democracy that engages all communities

a)  Provides at least 50 percent of its grant dollars to benefit lower-income communities, communities of color and other marginalized groups, broadly defined

b)  Provides at least 25 percent of its grant dollars for advocacy, organizing and civic engagement to promote equity, opportunity and justice in our society

 

EFFECTIVENESS … investing in the health, growth and effectiveness of its nonprofit partners.

a)  Provides at least 50 percent of its grant dollars for general operating support

b)  Provides at least 50 percent of its grant dollars as multi-year grants

c)  Ensures that the time to apply for and report on the grant is commensurate with grant size

ETHICS … demonstrating accountability and transparency to the public, its grantees and constituents.

a) Maintains an engaged board of at least five people who include among them a diversity of perspectives—including of the communities it serves—and who serve without compensation

b) Maintains policies and practices that support ethical behavior

c) Discloses information freely

COMMITMENT … engaging a substantial portion of its financial assets in pursuit of its mission.

a) Pays out at least 6 percent of its assets annually in grants

b) Invests at least 25 percent of its assets in ways that support its mission

 

How Does Australia Measure Up?

So how are we doing here in Australia? Do we follow best practices in philanthropy? Good in some areas, but with room for improvement in many.

For the benchmarks under values, it appears that grantmakers in Australia do a good job of targeting their services towards vulnerable/marginalised communities. The Australia Institute of Grants Management recently released the results of its Grants in Australia 2015 survey.  The majority of grant recipients participating in the survey served vulnerable populations including: economically disadvantaged (25.4%); people with disabilities (23.4%); at-risk youth (15.1); indigenous people (12.2 %).

Advocacy is trickier. While there may be cases where grantmakers are specifically prohibited from funding advocacy activities, the Charities Act makes it clear that advocacy is a legal activity for private philanthropic organisations. Grantmakers should avoid putting anti-advocacy clauses in their funding contracts unless they are legally obligated to do so. If we want to make the greatest social impact, we have to be willing to work to change the system. Consider program areas such as environmental protection and human rights. The biggest gains are made through advocacy.

 

Data suggest that Australian grantmakers have a lot of room for improvement on the benchmarks under Effectiveness. According to the AIGM 2015 Grants in Australia survey, 42% of respondents noted a decrease in grants available to fund core operating expenses and 30% noted a decrease in multi-year grants. Grantmakers who decline to make operating and multi-year grants shortchange themselves and their community. Operating grants, delivered to carefully selected non-profit organisations, strengthen the community’s ability to help itself. Focusing on short-term project grants is like picking up individual starfish. It helps, but it does not address any of the structural problems that create the need in the first place.


Investing a substantial portion of your funds in multi-year grants and in supporting operating expenses may seem intimidating, or even counter-intuitive. It means that you will have fewer grantees and will have to say no to many appealing, and perhaps worthy, applicants. But making an impact on your mission is the most important thing. The key is choosing the right organisations to receive operating support and multi-year funds. This is where data collection and evaluation come in. Electronic grants management systems such as SmartyGrants give us more power than ever before to examine our work, measure and compare.   We can analyse the costs/benefits of different approaches to solving a problem, as well as look at which non-profits in the community to the best job of delivering the services that lead to the desired outcomes. This is where you can put all the data you’re collecting to work and really use it to inform your decisions.

Regarding Ethics, according to the 2015 Benchmarking Operational Processes and Expense study  a full quarter of reporting funds pay some or all of their Board Members. As the Criteria for Philanthropy at its Best points out:

“Research does not support the contention that compensated boards serve their institutions better. Moreover, every dollar spent on trustee compensation is one that could have gone toward achieving the mission of the foundation.”

Finally, under Commitment, according to the 2015 Benchmarking Study, Australia grantmakers exceed the benchmark for paying out assets, with endowment funds distributing approximately 6.4% of their assets per year. However, average annual distributions as a proportion of total assets appears to decline with increases in fund size.

 

Putting the Best Practices in Philanthropy to Work in Your Organisation

 

I invite all grantmakers to review the Criteria for Philanthropy at its Best against their organisation’s practices. This could be incorporated into your strategic planning cycle, your annual reporting or it could be the catalyst for taking a new look at your mission, your vision and your priorities.

 

Beginning with a clear idea of the desired end in mind (even if that end seems unattainable), work through the criteria and consider:

 

 

As grantmakers, trustees, or members of local government, you have been entrusted to use funding in the best way possible to achieve your mission. Applying the Philanthropy at its Best Criteria is a way to lift your head up from looking at all the individual starfish and see the big picture.

 

If you would like assistance in applying the Criteria in your organization, please contact me at Kate@katecaldecott.com.au or 0447 227 598.

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