The Impact of the Financial Crisis on Philanthropy - a Cross Sector Analysis

By Krystal Lea, Pro Bono Australia Intern

Melbourne Community Foundation hosted a panel discussion of national and international economic and philanthropic experts to share insights and discuss promising trends to mitigate the impact of global financial crisis on philanthropy in Australia. Krystal Lea was there and reports for Pro Bono Australia.

Panellists included Peter de Courcy Hero of Melbourne Community Foundation, Peter Shergold of the Centre for Social Impact, Brendan Rynne of KPMG, Infrastructure and Policy group, and Mark Watt of Whitelion.

Peter de Courcy Hero, a leading philanthropic expert in America and recently appointed Director of the Melbourne Community Foundation, introduced the discussion by making two observations:

1. Times are the worst they have ever been, and
2. People are proving to be incredibly creative and innovative in developing strategies to manage the scarcity

The issue of CSR was also addressed during introductions, with both Shergold and Rynne commenting that true test of corporate commitments are going to be tested by the current financial crises. Shergold also posed a question around the challenges before social enterprise as philanthropic dollars diminish as need increases.

Watt underscores these challenges, citing that 8 of 9 foundation requests did not receive funding.

“Four cited the global financial crisis as the reason,” he shared.

Another story was told of a foundation that had to retract a promise of support after reviewing latest financials.

Questions for the panellists brought to light interesting points around the role of government, the state of the NFP sector, and the role of technology for managing the financial crisis.

There is no argument that government funding for NFPs is essential, particulary, Rynne argued, if government wants to mitigate the potential of communities putting more pressure on government to provide services.

But it must be managed carefully. Government funding, come with strings attached and may lead to an unhealthy dependence. This is especially true as the diversity of NFP funds stands to shrink as philanthropic support decreases.

Working with corporates to identify innovative approaches to leverage talents to fill the gaps was one example of how partnerships could be used to shift NFP focus away from purely financial contributions.

Building government understanding of the contributions the not for profit sector makes to the economic and social growth was also identified as essential.

Arguing that the social value of the economic and social activities of the NFP sector is largely unrecognized by government, Rynne stressed the importance of demonstrating to government that investments in the NFP sector provide far-reaching and sustainable social benefits.

Rather than focusing on their tax-status, Hero explained, government should be looking at strengths and assets NFPs bring to communities. NFP leaders, he argues, possess tremendous potential that is “critical for building civic society.”

And the tide is turning. Growing interest and support for the not for profit sector is evidenced by initiatives such as Obama’s establishment of the Office of Social Innovation and Rudd’s Social Inclusion Unit.

Competitiveness and duplication in the NFP sector was also discussed. Shergold agreed with the comment that responsible social investment was frustrated by duplications found in the Sector, but stressed that organisations must take care to preserve innovation and creativity as when considering merging.

Hero also agreed that mergers provided potential benefits, but argued that the time to merge is when things are good. The time and money required to successfully navigate a merger are considerable. A significant matter is investing in building the administrative capacity of the organization to manage the change, an area that is not readily funded by donors.

Indeed, Hero cites this resistance to support the administrative needs of NFPs as the greatest ‘detrimental attitude’ NFPs struggle against.

Panellists all agreed that CSR was set to prove itself in the times to come. Rynne noted that corporations can’t walk away from CSR commitments, but Shergold appeared more cautious.

What will come, he speculates, will be more like a CSR 2.0, where the internal structures and behaviours of companies reflect their outward behaviours.

Technology and social networking where also addressed as tools to help weather the financial crisis. Hero called the internet the “charitable GPS” for giving and went on to described social networking platforms as incredibly powerful forms for enabling giving.

The take home message? Yes, the global finance crisis will have an impact on philanthropy. No, we don’t know it will last.

So what do we do?

Keep innovating, invest in the capital needed to keep NFPs strong, and work together.