06/07/2022 - 16:00

Seeking a future funds foundation

06/07/2022 - 16:00

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The first of a three-part series focused on WA’s culture of giving looks at the not-for-profits turning to endowment funds for financial security.

Seeking a future funds foundation
Lauren Major is head of development, corporate partnerships and philanthropy, at WA Ballet. Photo: David Henry

Foodbank joined a growing list of local not-for-profits last month when it launched an endowment fund to shore up its financial future.

The charitable organisation is hoping to raise $20 million for the fund through its benefactor program, Guardians of WA, to secure its financial sustainability.

The goal is ambitious, totalling more than Foodbank’s 2021 total revenue of $5.9 million.

The money in the fund will be invested for the long term, with the earnings on the capital used to support Foodbank’s activities.

Foodbank chief executive Kate O'Hara said the money would be used to cover unexpected costs and give the organisation greater flexibility to respond to need.

“We want to create a network of the Guardians of WA who put funds into a very secure investment system and it’s the growth on that we use to deal with unexpected costs on the operating business,” Ms O'Hara told Business News.

Ms O'Hara said the fund would give the organisation some financial breathing space, enabling it to stop jumping from one financial need to the next.

Foodbank has joined West Australian Ballet, West Australian Symphony Orchestra and Foundation for the WA Museum, among other groups, in creating an endowment fund.

Foundation for the WA Museum started its endowment fund in 2014 with the goal of reaching $50 million and becoming the largest cultural endowment fund in Australia.

Its goal is to fund ‘extras’ for the museum, which aren’t included in its government remit, over the long term.

The foundation recently upped its endowment target to $60 million.

At last official count, the foundation had raised $28.5 million.

Foundation for the WA Museum general manager fundraising and development Coralie Bishop, who will be chief executive from July, said the endowment fund was managed by the board’s investment committee.

The fund has distributed money to various programs over the years, including to bring international exhibitions like Dinosaurs of Patagonia, which opened in early July.

Ms Bishop said the foundation had gone through a period of growing the endowment and was now focused more on distributing the funds.

Meanwhile, West Australian Ballet launched its fund more recently – November 2019 – with a $500,000 donation and a commitment to match donations up to $2 million from the Wright Burt Foundation.

West Australian Ballet head of development, corporate partnerships and philanthropy Lauren Major said the company consulted with its donors and stakeholders about the feasibility of a fund before deciding to start a campaign.

She said a key consideration in going ahead with setting up the fund was the organisation’s philanthropic maturity.

West Australian Ballet was very fortunate because they have had a lot of really amazing work done in that philanthropic space over a number of years,” Ms Major told Business News.

The company met its $7.5 million target for the endowment fund in December 2020. Ms Major said the offer of matched donations made giving to the endowment fund more appealing.

“This encouraged people who were existing donors with us to increase their contribution, to look to that legacy and that gift in perpetuity, as they knew it was going to be matched by the Wright Burt Foundation,” she said.

WA Ballet’s fund is managed by an external investment consultant.

Its board adopted a constitution that outlines what the fund can be used for: earnings are to be spent on the company’s artistic vision, but capital can only be accessed in extreme circumstances. According to the company’s 2021 annual report, WA Ballet received $14,502 in interest and $76,474 in investment portfolio returns.

Endowment earnings played a part in funding the addition of seven dancers to Corps de Ballet positions last year.

“It’s had an immediate and very big impact for us,” Ms Major said.


Coralie Bishop is the incoming chief executive at the Foundation for the WA Museum. Photo: Kelly Pilgrim-Byrne

Pros and cons

Philanthropy Australia state manager WA Dylan Smith said the establishment of endowment funds spoke to a broader movement in the not-for-profit sector to ensure organisations were sustainable.

“It’s that trend of continuing to think how we can both work, day to day and year to year, but also having some stability for a ten-year, 20-year, 100-year plan,” Mr Smith told Business News.

“We have seen that from the past couple of years, that we don’t quite know what’s around the corner.”

He said endowment funds could offer a layer of security to organisations, giving them reserves to call on if there were funding gaps.

“There’s the stability from year to year but there is also the growth and investment potential of an endowment fund,” Mr Smith said.

However, not all organisations were in the position to set up an endowment fund.

Mr Smith said creating an endowment fund required resources that could be difficult for organisations to accumulate if they had more pressing short-term financial needs.

“It might need to be weighed up between other year-to-year fundraising efforts and campaigns and how much energy and resources are going to be put in for something that’s there for the long term, versus something that might be needed for the immediate or mid term,” he said.

While most donors understood the need to collect funds for the future, Mr Smith said, some may no longer feel their donations were required.

“Sometimes donors review the books of an organisation and notice there is a healthy reserve,” he said.

“Some donors, in some cases, might read that in the wrong way and say, ‘They are a healthy organisation, they don’t need my contribution’ or ‘Why have they got so much reserved tucked away?

“The nuance of that conversation is important, because having a strong reserve means a strong organisation and therefore it’s even more able to do well with that donation.”

Endowment funds need to be overseen by skilled professionals, but Mr Smith said many not-for-profits would have people on their board with financial backgrounds.

If the board does not have the capacity, Mr Smith said organisations could partner with other organisations to manage the funds.

“That’s a way for an organisation to create an endowment fund or have a place to receive bequests that sits alongside their other financial efforts but is looked after by trustees or a community foundation or a financial organisation that provides that service,” he said.

“Then they can have that endowment fund looked after and invested and managed, but partner with that organisation to direct the grants from that fund to their organisation and their purposes.”

Mr Smith said endowment funds were a good way to put large gifts such as bequests to use.

He said the large incoming transfer of intergenerational wealth on the horizon meant people would be looking for places to donate gifts so as to leave a legacy.

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