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Archive for November, 2010

The Macquarie Group Foundation that I chair celebrated its 25th anniversary recently. In celebration, I had reflected on philanthropy in Australia over the last two decades. I had also made some predictions for the future, which I will share again here. This is no tribute to my foresight: the harbingers of change are already evident.

Within a sector that will continue to become larger, I’d expect to see further developments in 3 key areas.

First, I anticipate that the increased capacity and scale of many economically-significant NFPs will see them evolve into true social enterprises. They will retain the vision that inspires their members, donors and volunteers but increasingly couch their benefits in terms of a blend of social and financial value. Already around 20,000 Australian community organisations trade to fulfil their public mission, reinvesting their surplus income (their ‘profit’) into improving their organisational capacity and scaling-up their activities.

Second, I expect to see new investment vehicles emerge to raise funds which will complement the donations of philanthropists. A contemporary challenge, which will be overcome in the near future, is building and accessing a capital market for social impact. Investors need to be able to make low-interest loans to or acquire equity in social businesses. The early signals are encouraging. The Commonwealth has recently announced a Social Enterprise Development Investment Fund and the WA government has budgeted for a Community Development Investment Fund. Both are intended to harness loan capital for community benefit.

The initiatives are intended to corral social impact investment from those who seek not only a modest financial return but an opportunity to do good. This is the bold business model underpinning GoodStart, which has emerged to manage around 600 of the ex-ABC Learning childcare centres. It’s dependent not on government grants and philanthropy but loans which offer lower than market returns. That’s just the beginning. Expect to hear in the near future of new vehicles such as social impact bonds or a social stock exchange.

Third, and in some ways most influential, the measurement of social and environmental impact will increasingly be incorporated into government measures of national well-being. The social costs (of externalities) and benefits (of community activity) will long before 2035 be fully integrated into measures of Australian economic income and growth. The extraordinary value of community engagement will be accounted for in our national statistics. The social economy, and the contribution which it makes to community well-being and civic engagement, will at long last be properly accounted.

Blog coordinator’s note: For info on the Centre for Socal Impact, please see http://www.csi.edu.au/.

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 I got expelled at 15 when I did my first protest. It didn’t stop me.

My activist friends got killed. It didn’t stop me.

And I have been jailed. It didn’t stop me.

You don’t have to go through any of that to make a difference.

But to younger people involved in the fight for justice, I want to say, one thing is important – commitment.  It is a marathon, not a sprint.

It takes time to listen and understand people and their problems.

It takes time to build relationships.

It takes time to educate yourself, your supporters, your audience.

It takes time to gather the right resources.

It takes time to try out creative ideas.

It takes time to move from anger to peaceful nonviolence.

It takes time to heal from pains that result from the journey.

It takes time to make deep change.

The social and environmental movements need your time, your talent, your unique way of seeing problems and solutions.

If you want to see a different world, get involved and stick around a bit.

Good things sometimes take a little longer.

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In my last blog post, I looked at the general question, “Should churches (or religious organizations) be designated as charities?” and concluded, for practicality reasons, in the affirmative, on the basis of history, and the widening (a long time ago) of the legal definition of charity from being of just helping the poor and needy to being for the community good.

In this blog post, assuming this conclusion, I would like to examine the specific case question: when should a church, or a religious organization for that matter, not qualify to be a charity?

First, the charity sector and the charity regulator have pretty much set out the standards and criteria which charities, once qualified, are expected to meet to continue to be designated as charities. These include good corporate governance practices, accountability to donors and other stakeholders, financial management, and staying true to their missions. There are enough of these rules and expectations, and most board members of charities will tell you that we do not need any more for charities to properly function.

All charities, whether religious-based or not, have to abide by these rules and standards. Errant charities can, and will be, dealt with. In this context, any discussion of which organization should not be charities should apply equally to religious and non-religious charities.

What is it then about religious charities that they provoke so much discussion on the question of religious organizations as charities?

 In my view, the reason lies with religious leaders and their link with divinity.

The leader of a regular nonprofit organization may very well be charming and popular with his people (staff, donors, beneficiaries, etc) but he is nevertheless a mortal who is expected to follow the rules. If he abuses his position, he can, and will, be taken to task, not just by the regulator but also by his own people and the public at large. Case in point is the old NKF where excesses of its management led to a public outcry and what has come to be known as the NKF saga.

A religious leader has a lot more going for him. He is often regarded as the earthly representative of God (or equivalent). He is less likely to be questioned by his flock that sees itself as being a part of a cause that is greater than the leader and the organization. The leader’s pronouncements on many matters can be near-absolute as they are deemed to have come from “above.” The prospect for abuse of such power in such situations can be high.

For charities, the upmost concern in the eyes of the public tends to be financial wrongdoing. The risk for financial abuse in the mainstream churches, however, tends to be generally low because of the selection, formation and code of conduct of their religious leaders. For example, in the Catholic Church, a priest is ordained only after an intensive period of scrutiny and formation of eight or more years, upon which he takes a vow of chastity, obedience and, sometimes, poverty. He is expected to live less than modestly. In Singapore, Catholic priests are paid $500 per month although their board and lodgings are provided by the Church. I only know this because I am Catholic (making my declaration here) but I reckon the situation is similar for the other mainstream (Anglican, Methodist, etc) churches. That is not to say that there is no abuse, but hopefully these churches have also built into their internal structures and systems, the mechanisms to prevent, surface and deal with such occurrences.

On the other hand, some “new age” churches and religious organizations may not have the same set of entry requirements, formation process, lifestyle expectations and controls in their selection of the leaders. Indeed, in some cases, leaders emerge by virtue of their charisma and ability to win followers who believe that their leaders’ messages are divinely inspired. Should such a charismatic leader have a flawed character, he (or she) can do untold damage. In extreme cases, these will be classified as cults, which are, of course, banned in Singapore, but not some other countries.

Coming back to the question of charitable organizations, the public expects charity leaders to function with financial prudence, if not, frugality. They would generally take a dim view of charity leaders who reward themselves handsomely from the largesse of their followers and donors, and live extravagant lifestyles. On the other hand, it is unlikely for the mesmerized followers of religious leaders to either notice or reject such extravagance.

This then is the conundrum for regulators and those outside looking in: What do they do about any perceived financial improprieties when scrutiny, objections and even information are not forthcoming from the inside?

There is no easy answer. What I think may be best is greater scrutiny and rules requiring greater transparency and accountability of those religious (and non-religious) organizations where the risk of abuse is higher.

This, however, does not appear to be the current approach of the charity regulator. Currently, charity regulations are skewed by the size of the charities: the bigger the charities are, the more controls and scrutiny are needed. Yet, it is in the smaller organizations (which are able to keep under the regulator’s radar) where there is often more room for manipulation.

In monitoring charities and in the rules requiring transparency and accountability, the basis should be the risk profiles of the organizations. Size count, but that should not be all. There are also other risk factors such as the governance structure and the people involved. And of course, we should also take into account the particular nature of the sector and its players. Yes, the religious sector has the peculiarity with respect to the power of its leaders. But when we get to the other sectors, there are elements of each which will also affect their risk profiles.

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