Many non-profits in Australia today are creating separate foundations or perpetual funds that generate an ongoing income stream and provide financial security in the future. Foundations also present a powerful giving option to donors who often love the notion of giving to an entity or fund that is safe, secure and know their gift will continue in perpetuity.
Today, in this blog written by friend of Fish, Kathy Knott, we examine why non-profits do this and how to determine if a foundation is right for you.
Firstly, consider your objectives:
- Do you want to create a pool of funds (corpus) that generates an income stream in perpetuity via the interest generated to fund ongoing special project(s) or one significant major project?
- Do you have an existing or potential project that is supported by your board, is high-profile, aspirational and excites your constituents?
- Are you prepared to carry out a feasibility review with your existing donors to determine if the notion of a foundation is attractive to them and what sort of projects might excite and encourage them to give?
- Does your organisation have an active bequest program or the potential to launch a bequest program around your foundation? Bequestors particularly like the security of knowing that their gift will keep on giving beyond their lifetimes.
The three popular ways to set up a foundation are:
- Create a new bank account separate from your gift or operational accounts, using a name that reflects its intention and has resonance with donors, e.g. XYZ Foundation or Perpetual Fund or Capital Fund. Seek and secure gifts to the fund and let the principal grow, using only the interest, as and when determined by your board.
- Create a separate, stand-alone company with its own DGR tax status. This will require a separate constitution and charitable objects as well as an investment strategy and will be managed by a designated Chair and committee. This is the most expensive option but also the most secure in the event of your organisation ceasing to exist for whatever reason, as the foundation’s funds are protected.
- Establish a ‘named fund’ within a community foundation. This is easy to set up with an initial investment of $20,000 and administration and marketing carried out by the Trust. There are ongoing fees however and you still need to develop your own campaign and communicate this giving option to donors.
- Involve your Board from the outset – they should determine the appropriate mechanism and drive the foundation as well as show leadership by making the first gifts or bequest pledges.
- Involve your finance committee in decisions regarding the best investment strategy.
- Ensure that you have adequate resources to manage the foundation.
- A recognised and high-profile ambassador as the face of the Foundation will add credibility.
- Set up a separate foundation committee (which need not be big or onerous) consisting of board member(s) and major donors to drive the foundation.
- You must have a case statement, appeal material and awareness campaign and provide your Foundation committee with the tools they need to do the job. Be aware, however, that some board and committee members may not feel comfortable about making ‘the ask’. That’s okay – their knowledge and contacts are just as valuable.
- Set achievable goals for committee members according to their strengths, recording how many prospects they have introduced, cultivated and/or asked.
- Follow the golden rules of a capital campaign and don’t publicly launch until you have sufficient pledges or gifts to instil confidence and inspire others to give.
- Include an option to give to your foundation in all your fundraising and marketing collateral.
Go for it, if it is right for you and watch your nest egg grow!
See you in the pond,
The Fish Chick.
Kathy Knott, EMFIA, M.Bus (Philanthropy and NfPSt), is an Associate of Fish Community Solutions. For any queries about perpetual funds, please email Kathy via The Fish Chick at email@example.com)