Growth in private ancillary funds offers charities new opportunities

The growth in popularity of private ancillary funds (PAFs) presents charities with an opportunity to engage with wealthy Australian donors in a different way, says Chris Cuffe FAICD, chairman and founder of Australian Philanthropic Services.

He notes that the latest figures from the Australian Tax Office’s Deductible Gift Recipient (DGR) listing reveal that in the past financial year, the largest number of new PAFs were established since the start of the global financial crisis. Of the total number of PAFs in Australia (1,233) 149 were established last year.

According Australian Philanthropic Services (formerly known as Social Ventures Australia), PAFs are likely the fastest and largest growing segment of philanthropy. PAFs held $2.93 billion in funds as at 30 June 2012 and distributed $250 million to the community across welfare, education, culture, research and other sectors during 2011/12.

A PAF is a type of charitable trust which must be managed by a corporate trustee and allows individuals, families or associations to establish and manage their own charitable fund in the way that best matches their philanthropic goals. It can offer donors tax deductibility, flexibility and deeper engagement in their charitable giving.

Cuffe says: “PAF founders are rarely new to giving money away to charity. However, once they set up a PAF, their thinking and approach to giving often shifts and they move from being ad hoc donors to being more structured and thoughtful.

“Previously people might have given away whatever money they had left in their bank accounts at the end of the year. With a PAF, the thought process is different. Once you set up a PAF you become a compulsory giver and have to give away at least five per cent of the value of the PAF each year. This often leads to people getting more involved with particular initiatives or programs that a charity is running and actually giving away more money because they are donating with the long-term in mind.”

Cuffe’s top tips for charities hoping to access funding from PAFs are:

• Know your DGR status – PAFs can only give to organisations with DGR Type 1 status.
• Do your research – Individuals are much more likely to give if they have a connection to the cause or the organisation.
• Make a personal approach – Don’t just send off unsolicited requests for funding.
• Peer referrals are important – If you know someone who may be interested a charity in which you are involved, set up a meeting with the CEO or fundraiser and make sure you attend.
• Report on impact – Clearly demonstrate the impact of donations and report back to the donor.
• Be open to engagement and involvement – PAF founders like to see and hear first-hand what the charity they support is doing. 
• Follow up, keep in touch and, most importantly, say thank you.