The combination of a prolonged pandemic, war in Ukraine, and climate change-related natural disasters have contributed to global supply chain disruptions, energy scarcity, and concerns around food security–all contributing to inflationary cost of living pressures that look likely to result in economic recession. A recession that may very well trigger an extinction event for many not-for-profit and charitable organisations.

If history is a teacher, then research undertaken by the National Committee for Responsive Philanthropy is a salutary lesson, highlighting the impact on funders and donors during the Great Recession of 2008, with overall sector funding dropping as much as 10.5% at its height in 2009.

The recovery was protracted, and it wasn’t until 2013 that levels matched 2007 giving levels.

With a potential global recession on our doorstep, what lessons can we apply to the current situation and how can we build sustainable capacity and future-proof philanthropy?

The answer lies in changing our mindset to giving, moving from campaign-based, episodic donations to long-term sustainably funded operations.

From relationships to relevance

In 2017-18, total giving in Australia was $13.1 billion[i]

If you are a small charity relying on discretionary, disposable income, then the days ahead will be challenging. Evidence[i] shows that the proportion of taxpayers claiming for tax deductible donations has fallen in every income bracket (and overall) from 37% to 29% between 2010‐11 and 2019–20.

The days of rattling the tin are over.

The way forward is to partner with long-term funders who are aligned to your cause and who want to deliver true and meaningful social impact.

Funders desire opportunities to learn from other funders. This is particularly true for family foundations, which share a desire with not-for-profits for improved relationships based on openness, transparency and  longer-term partnership rather than transactional relationships[ii].

Structured Giving

Australia’s environment for philanthropy ranks 19th in the world according to Philanthropy Australia’s recent Giving Trends and Opportunities 2022 report, and an estimated $2.6 trillion will pass between generations over 20 years.

But don’t rely on gifts in wills for your long-term income. With the rise in blended families, so too does the potential for many wills to be contested by disgruntled family members.

That’s where the benefit of structured giving comes in.

Structured giving refers to relatively large-scale planned giving through a vehicle such as a private ancillary fund (PAF), foundation or testamentary or other legacy trusts. It can also occur through corporate cash donation or larger-scale, planned contributions from individuals and families[iii].

The advantage of using PAFs, foundations and trusts is that in essence, the funds have been handed over to a non-profit entity with independent trustees/directors alongside the original donor. The donor no longer has full control over the corpus and its earnings, and subject to the constitution of the entity, the entity will continue giving in perpetuity.

The funds cannot be inherited by the donor’s children but remain in place for the public good. Many of the sizeable philanthropic foundations that exist in Australia today were set up in consultation with the living donor and his/her family or were established through a legacy, after the individual had passed away.

In this respect, these funds are recession proof – the only exception being poor management by fund managers with responsibility for growing the endowment.

Corporate Philanthropy

In 2010, it was reported that during the Great Recession, most US companies gave less money to charity, but total corporate philanthropy rose seven percent to USD9.9 billion with a mix of cash (USD3.8 billion) and non-cash (USD6.1 billion) philanthropy.

Budgetary constraints forced companies to shift their philanthropic support from hard cash to other non-cash ways to continue to support their not-for-profit partners.

It also presented an opportunity for companies to re-evaluate their own social purpose and expand their philanthropic approach to provide more strategic investment.

In Australia, survey data from Giving Australia 2016 estimated that in 2015–16:

• Australian businesses gave $17.5 billion: $6.2 billion in donations; $7.7 billion in community partnerships; $3.6 billion in non-commercial sponsorships
• over half of this amount (51%, $9 billion) was given by large businesses even though these represented 0.2% of all Australian businesses.

And a major theme from the survey is that impact matters – philanthropists wanted to demonstrably shift the dial and have influence; to have some agency in achieving a desired outcome.

As noted in the report, this desire to be engaged and in control of giving outcomes, is not unique to Australia but consistent with experience around the world.

To build long-term, recession-proof partnerships with philanthropists, corporates must think strategically and be willing to incorporate a funder’s desire to influence social impact.

Genuine partnerships will weather any storm and provides continuity of funding.