5 Income from other sources

Figure 5 The National Lottery gave the voluntary sector £1796.8 million for the year ending March 2015

Voluntary organisations also receive funding from other parts of the voluntary sector, private sector organisations, the National Lottery and from income earned on investments.

You have already read about donations by individuals but donations are also given by private sector organisations. For example, every Waitrose branch gives £1000 each month to three local causes and since the scheme started in 2008 the company has donated £14 million. Waitrose gives the money but customers choose which one of the three local causes receives the most by allocating tokens in a box (Waitrose, 2015).

Although each organisation receives only a small amount, the organisations themselves are usually small too and a few hundred pounds can make a difference.

Philanthropy by individuals and organisations is nothing new, although it is now organised more formally, for example with organisations (such as the Institute for Philanthropy) specialising in giving advice to philanthropists. Research by Moriarty (2014) in Ireland concluded that philanthropy foundations are important funders of ‘hard-to-fund’ cases: those organisations that struggle to achieve government funding or to receive individual donations. Considerable media attention is also given to high-profile philanthropists, such as Melinda and Bill Gates.

Activity 6 Family foundation philanthropy

Timing: Allow approximately 10 minutes

Watch this video from 2011 in which Professor Cathy Pharoah from Cass Business School and Charles Keidan, Director of Pears Foundation, talk about philanthropic giving by family foundations.

Make notes on the key features of family foundations.

Download this video clip.Video player: volb1_wk4_activity6_familyfoundations.mp4

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Transcript

Miranda Thomas

With austerity starting to bite, and in the climate of growing economic uncertainty, major philanthropy is now more important than ever. One of the biggest sources of charitable giving in the UK is family foundations, and a new report has looked at trends in this area.

I’m joined by two of the authors of that report – Professor Cathy Pharoah, who is Co-Director of the ESRC Centre for Charitable Giving and Philanthropy here at Cass Business School, and Charles Keidan, who is Director of Pears Foundation, a UK-based family foundation.

Cathy, first of all, what exactly is a family foundation?

Cathy Pharoah

A family foundation is just like any other charitable trust, except that it tends to have family members on the board, and it’s funded totally by a family.

Miranda

Can you give me some examples of family foundations and the sort of work that they do?

Cathy

Well, the most famous I suppose, or the most well-known, family foundations in the UK are the Sainsbury group of foundations. There’s around 20 foundations and they are run by different members of the family, and they focus on different kinds of topics.

But another well-known one is the Volant Foundation set up by J.K. Rowling in her mother’s name, and which dedicates itself to MS, which is the disease her mother died from.

Miranda

And Charles, why have you decided to produce this report?

Charles Keidan

Well, as a family foundation ourselves, we are naturally interested in issues of philanthropy, but we found there wasn’t actually so much research and hard data on the subject that can inform thinking about the subject. So we decided to work with Cathy and the Centre for Giving and Philanthropy at Cass Business School to produce what’s now become the annual ‘Family Foundations Giving Trends’, a report which is in its fourth year.

Miranda

What are the main points raised by this year’s report?

Charles

So, the main points are that family foundation philanthropy has been a very robust source of giving to charitable causes in the UK. Over the last five years, £6.4 billion has been spent by UK family foundations, and that giving, over a five-year period, has increased by 27% in real terms, which outpaces general giving from the public – which has remained flat – and also giving from corporates, which has only increased by 7%.

Miranda

So Cathy, what prompts people to become philanthropists?

Cathy

Well, we found there’s a number of reasons. There is no single magic bullet or trigger that makes somebody want to be a philanthropist. It can be that there’s a history of philanthropy in their family background, that it’s related to their family values or their religious values. Family example we’ve found, even with major donors, family example is an extremely important factor in encouraging people to get involved in philanthropy.

And then, at a certain time in their lives, especially in today’s climate, some people have made enough money to be able to stand back from the business, there’s something they really want to do, and so they use some of their money to begin to develop a philanthropic programme.

Miranda

Charles, would you say that philanthropy through family foundations is changing?

Charles

I think it is changing in a number of ways. First of all, I think with less public money available, and more social needs, there’s much more attention on the role that philanthropy can play in society. And alongside that, there’s more of a focus on what foundations can do.

And that has necessitated, maybe increased, professionalisation in the philanthropy sphere, where family foundations are also employing professional members of staff that can help to develop philanthropic strategies that can be very clear about what they’re trying to achieve, and whether they know how and what ways they will be achieving it, and also looking at questions of effectiveness as well.

And those questions have really emerged over the last few years, and it really places an emphasis on the professional staff in foundations to be asking much harder questions of themselves in order to make sure that the scarce resources at their disposal are used as effectively as possible.

Miranda

What’s the strength of the family foundation model for giving?

Charles

So I think the strength is that it really allows a more long-term approach to different and difficult issues, which sometimes suffer from a more short-termist approach, particularly in the case of governments, and also it’s less ad hoc than individual giving. If you decide to set up a family foundation, you’re really creating a vehicle which can help to structure and shape approaches to giving over a longer period of time, and that’s of real potential value compared to more ad hoc approaches.

Miranda

And would you say it’s just for the very rich?

Charles

Well, I’d say definitely it’s a possibility for them, and our family foundation report lists the largest 100 family foundations. But I think actually there’s an opportunity for everybody at different levels to be involved in philanthropy, whether it’s through a family foundation vehicle, or just through thinking about how to give, and how to give most effectively to causes that they care, or one cares, most deeply about.

Miranda

Charles and Cathy, thank you very much for your time.

End transcript

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Comment

Family foundations are charitable trusts but tend to have members of one particular family on the boards of trustees. They employ professional staff so that they can improve the effectiveness of their giving strategies. Family foundations appear to be an important source of funding, given that the amounts they give are increasing, whereas individual and corporate donations have slowed down. Keidan argues that family foundations are increasingly important in helping difficult issues that require a longer-term approach.

So far this week you have seen that there are consequences for voluntary organisations in terms of funders’ expectations of a return on their contribution, depending on which kind of funding the organisation pursues. Essentially, the more specific the purpose for which funding is given, the greater the degree of control and accountability the funder will usually expect. Many sources of funding come with ‘strings attached’ that may place limitations on an organisation’s freedom of action. So there may be trade-offs that have to be made when deciding whether to accept this funding. Organisations need to decide whether the trade-off will compromise their mission too much. This is a decision that needs to be taken consciously rather than by default.