Simple solution as charitable Trusts struggle

Simple Solution as Charitable Trusts Struggle

Liz Koh
Deputy Chair, Nikau Foundation
27 July 2019

New Zealand ranks highly against other countries when it comes to charitable giving. We have been philanthropic for a very long time and our country is well endowed – in fact, some would say over-endowed – with Charitable Trusts. Many of these Trusts are decades old and are still undertaking the excellent work for which they were set up. However, some are struggling.

There are many reasons why a Charitable Trust may find itself languishing after a time. Some of these include:

  • It’s difficult to identify beneficiaries or spend the income of the Trust
  • It’s becoming difficult to attract Trustees
  • The legal/compliance/reporting requirements are becoming too cumbersome
  • The work of administering the Trust is becoming too onerous or disproportionate to the level of funding
  • The Trustees wish that they knew more about local issues and opportunities, where the greatest needs are and what other funders are up to

Forward-thinking Trusts are looking for solutions to get around their cumbersome and expensive structures and make themselves more relevant to the needs of present day and future communities.

As an example, Trust Porirua recently transferred their $5.5m of assets to Nikau Foundation, Wellington’s Community Foundation, to safeguard and grow. This Trust had been struggling heavily with administrative costs, set up under the old Licensing Trust model long after it still had a realistic alcohol licensing role in the local community. Towards the end of its life the Trust was spending three times as much on its structure and administration – including the public elections of Trustees – than it was able to return to the community.

In late 2018, Trust Porirua folded its remaining assets into a district fund with Nikau Foundation. If current rates of return continue, the new Nikau Porirua District Fund should be able to return at least two to three times as much to its community.

Former Chair of Trust Porirua, Tim Sheppard, said at the time of the transfer, “Trust Porirua and its assets needed to get to a place where they could work effectively for Porirua, with maximum returns to the community. This decision will help secure the future of funding for the Porirua region in a sustainable way, at least doubling the amount returned to the community and ensuring good investment and grant making practices for the long term”.

A number of Hearing Associations from around New Zealand are also in discussions with their local Community Foundation to take over the management of their assets, enabling their charitable purpose to continue.

The Gisborne Hearing Association had found that their active membership and the use of their premises had been steadily declining due to advancements in hearing technology. Coupled with some other Board challenges they could see they would have to close, which was a difficult reality since there was still a need to financially support some members of the hearing-impaired community.

A solution was found through The Sunrise Foundation which took over the management of their assets and grant-making to establish ‘The Sunrise Hearing Assistance Fund’. The Association’s capital fund is secured, is still receiving donations and generating interest income to support hearing-impaired members of their local community.

The scale of dormant or struggling Charitable Trusts in New Zealand is only beginning to emerge. Solutions need to be found to prevent the further erosion of charitable gifts that were made by previous generations of philanthropists and to give confidence to today’s donors that the gifts they make will be managed cost-effectively for their intended charitable purpose. The Community Foundation model, which provides a governance and management umbrella for charitable funds, is a simple solution which has the potential to do just that.

This article orginally appeared in national press at the link.

Liz Koh is Deputy Chair of Nikau Foundation, an Authorised Financial Adviser and author of ‘Your Money Personality; Unlock the Secret to a Rich and Happy Life’, Awa Press.

Contact your local Community Foundation today to discuss how your Trust funds can work more effectively for their charitable purpose


Ensure your Trust’s purpose continues on forever

Ensure your Trust’s purpose continues on forever

 Kelvyn Eglinton
Momentum Waikato Community Foundation
8 July 2019

Many in the business community put their time, energy and expertise into being trustees of not-for-profit organisations, incorporated societies or charitable trusts that distribute or use their funds to meet community needs. If this is you, you’ll know first-hand that the management of such groups’ capital or trust funds is not getting any easier.

Which is why many local Community Foundations are now in discussion with local Boards who are considering transferring their funds or assets to the Community Foundation’s long-term management and stewardship.

Board trustees’ most common challenges are:

  • the growing complexity of their role, particularly around compliance requirements;
  • their increasing obligations and potential liabilities;
  • the trust’s original mission has been realised and their funds need to be appropriately reinvested and/or redirected to another community benefit;
  • the recruitment of new trustees who are willing and able to meet the entity’s obligations is increasingly difficult;
  • their fund is relatively small scale and they are spending more time on compliance and annual reporting than on distribution;
  • the money is sitting in a bank account earning minimal interest and incurring ongoing fees.

A Community Foundation’s primary purpose is to focus and facilitate local philanthropy to build an endowment fund, so our regional community has its own financial resource to deliver the projects and programmes it needs. We’re here to make a better community for everyone, forever.

Placing your Trust’s funds under your local Community Foundation’s guardianship means you can take advantage of already existing professional services and get the security and greater investment returns that come from the scale of an already existing operation.

When you transfer the assets of your trust or society you can establish a dedicated ‘Named Fund’ with your preferred title, and then distribute grants in the group’s name every year, forever, to the beneficiaries and purposes you specify.

We work with you to develop a plan, a deed of gift and a charter that provide whatever level of control and involvement you desire.

A ‘Named Fund’ with your local Community Foundation retains your group’s identity and purpose, but gains our economies of scale, expert legal and financial management, experienced grant-making knowledge and dedicated investment support. As the original trustees, you can continue to make the decisions around distributing the fund’s income, but will be freed from the complexity, time, obligations and costs associated with operating your own legal entity.

As an example, the Gisborne Hearing Association has opened up their own ‘Named Fund’ with their local Community Foundation, The Sunrise Foundation.

For many years the Association maintained a space where the hearing impaired could practise lip reading, be shown how to get the full benefit from their hearing aids, join in recreational activities and gain companionship to break down their social isolation.

In recent times their active membership and the use of their premises had been steadily declining due to advancements in hearing technology. Coupled with the challenges described above, they could see they would have to close, although there was still a need to financially support some members of the deaf community.

Sunrise Foundation allowed them to achieve this goal by taking over the management of their capital and grant-making to establish ‘The Sunrise Hearing Assistance Fund’. The association’s capital fund is secured and still receiving donations and generating interest income to support hearing-impaired members of their local community.

Although changing times had forced the Gisborne Hearing Association to close, its legacy has continued. The Sunrise Foundation will continue on with their good work and enable a structure which will over time return more to the community.

At Momentum Waikato discussions are ongoing locally for the transfer of assets such as land and capital to our care. Because investment for philanthropy is what we do the more we grow and diversify our funding pool the stronger and more effective we can be, so these Trust transfers are a win-win for all involved.

If you would like to consider entrusting your group’s funds to your local Community Foundation, or simply want to know more, contact your local Community Foundation today. It could be the best call you make to ensure that your Trusts’ purpose continues on forever.