Here is my take on the different kinds of philanthropic giving, including where the money comes from and how it operates, as well as some considerations and tips for grant seekers.
The different kinds of philanthropic funders
Overall, philanthropic funding tends to fall into the following categories:
- Personal Giving: Most of us give money to good causes, perhaps on a small scale like a donation to an online appeal, or perhaps on a large scale, like supporting the redevelopment of a children’s hospital. And it is something that we can do any time – even, through making a bequest in our will, after we are dead. Individual giving has historically been the largest single source of community funding.
- Private trusts and foundations: eg Tindall Foundation, JR McKenzie Trust, Todd Foundation, NEXT Foundation. Essentially this is a larger scale and more intentional, organised, transparent and accessible version of individual giving, where wealthy families or individuals set up a charitable organisation specifically to provide funding for good causes. Often the money is given out in the form of grants, which are financed through the income earned from an endowment fund that is invested and designed to last for generations. Some foundations operate on a “spend-down” model where a large sum of money is progressively given to the community until none remains, and sometimes the money may come from annual donations from family members. Some family foundations operate nationally and some regionally.
- Community Foundations, Donor Advised Funds and Trust companies eg Acorn Foundation, Auckland Foundation, the Gift Trust, Perpetual Guardian and Public Trust. These organisations provide a shared infrastructure both for managing giving from estates after the donor has passed on, and for people with some wealth who don’t want to set up their own foundation. Services usually include both managing the investments and supporting grant making. The seventeen Community Foundations and the Gift Trust are non-profit models, while Trust Companies like Perpetual Guardian and Public Trust are commercial organisations.
- Statutory Trusts: These are grant-giving organisations which are set up via various acts of parliament and/or are administered by government agencies. Aotearoa NZ is unusual internationally in that we have a significant number of statutory trusts, which are in turn responsible for a significant portion of philanthropic funding. They include:
- Community Trusts: like Foundation North, Rata Foundation and Wellington Community Trust. These trusts were set up when the regional Savings Banks were sold in the 1980s and 1990s. The proceeds of these sales were invested, and the annual income generated is given as grants to communities, with each Community Trust focusing on the region in which their Trust bank operated. Here are twelve community trusts operating across Aotearoa.
- Energy Trusts: like Rotorua Energy Charitable Trust, TECT. These trusts were set up in the 1990s, when the electricity supply authorities (e.g., local power boards) were restructured. There are 24 Energy Trusts in Aotearoa, although some support their communities through energy rebates rather than grants. Like Community Trusts, they also operate on a regional basis.
- Gaming Trusts: eg Lion Foundation, NZ Community Trust, Pub Charity. These are technically statutory trusts however their funds come from the proceeds of gaming machines (pokies). Gaming Trusts are required by law to distribute at least 40% of gaming machine proceeds to the community.
- Government-administered grant schemes: eg Lottery Grants Board, Community Organisation Grants Scheme (COGS). Some grantmaking is administered directly by government agencies, and in particular the Department of Internal Affairs is responsible for a considerable number of funds, including the Lottery Grants, which distributes funds from the sale of lotto tickets. Many other government departments also provide grant schemes alongside funding provided through contracted services.
- Corporate Foundations and Business Giving: e.g., Vodafone Foundation, MAS Foundation. Unlike business sponsorship, where there is usually an expectation of direct benefit to the business from funding provided, some businesses set up corporate foundations which manage their giving in much the same way that a family foundation might. Other simply give directly to community causes. The benefit to the business is indirect, through demonstrating commitment to the community and through being a good corporate citizen.
The above is not a definitive list but it covers most of the different kinds of philanthropic organisations in Aotearoa NZ. My acknowledgements to BERL, as the categorisation above is based on their research released in 2015 into the Philanthropic sector.
Here are two additional considerations:
- The terms used are often not very helpful. Take for example the word “foundation.” As Wikipedia notes, a “foundation is category of nonprofit organization or charitable trust that typically provides funding and support for other charitable organizations through grants….However, the term “foundation” may also be used by organizations that are not involved in public grantmaking”. So, if an organisation calls itself a foundation, the chances are that they provide grants to the community, but there are many examples, e.g., university and hospital foundations, which are endowment funds designed to specifically benefit the organisation which set them up. Similarly, a public grantmaking organisation may choose to call themselves a Trust rather than a Foundation.
- There is a joke which goes “If you have seen one funder…. you’ve seen one funder”. In other words, it is difficult to make generalisations about what funders want or how they think, because every funder works differently. Some are transparent (see my previous blog on funder transparency) and community focussed, some less so. But, thanks largely to the good work of peak body Philanthropy NZ, more funders are actively exploring their role to support communities well, particularly those who choose to be members of Philanthropy NZ.
Top tips for grant-seekers
So yes, the philanthropic sector is a confusing one. What does this mean for community sector organisations looking for funding? Here are my top tips:
- Look for a good fit between what you do and what the funder focuses on. It is a waste of everyone’s time to apply for funding when there is no alignment in what you are both trying to achieve.
- Try to have a conversation before applying. Often funders are willing to provide informal advice about potential applications.
- Look at who they have funded & how much they gave. If a funder only supports arts organisations and you are working on environmental projects, it is probably not worth applying. Similarly, if their average grant size is 10k and you are looking for 250k, again it is probably not worth applying.
- When writing grant applications, try to pitch them to an audience who:
- Don’t have much time – in other words, keep in succinct
- Are not experts in your field – in other words, keep it simple and clear.
- Try to build honest, reciprocal relationships with funders. The best funding relationships are those where we both give and receive feedback and where we can be honest about both our challenges and triumphs.