Why DGR reform could boost collaboration in the philanthropic sector

Sector leaders say Australia can learn from how community foundations operate overseas   

Community philanthropy in Australia is being held back by regulations which make it harder for community foundations to collaborate with private foundations, advocates say.               

Because the majority of community foundations have deductible gift recipient 2 (DGR2) status, they are restricted to only giving funds to organisations that also have DGR status. They are also currently unable to receive funds from private ancillary funds (PAFs).

Ben Rodgers, the chair of Australian Community Philanthropy, told Pro Bono News this differed from the international experience of community foundations.    

He said overseas community foundations can receive funds from private foundations to tackle major issues like homelessness, family violence or educational disadvantage.

“Such cooperation can have great impact, and bring all forms of community capital to bear on important local issues,” Rodgers said.

“This is particularly important [in times of] crisis. Overseas community foundations are responding to COVID-19 by partnering with government and larger foundations to create national giving frameworks that filter funds to local communities. 

“This results in strong impact, where people have increased local contribution and engagement. In Australia, the current environment hampers this flow-on impact. 

Maree Sidey, the CEO of the Australian Communities Foundation (ACF), noted that in the United States, community foundations often established pooled funds for certain issues such as immigration detention or medical research.

Sidey told Pro Bono News these community foundations were used as infrastructure organisations, whereby other foundations give to them, and then they can decide together how that money is distributed.

She said this cannot be done in Australia because private foundations can’t give to public foundations.

“So [we’re missing out on] this really critical role that community foundations play in other countries, which is getting money to community-based organisations who we know are doing great work,” Sidey said.

“Community foundations act as a sort of clearing house of good grant making to community based-organisations. And that’s a really important role helping private foundations understand who’s out there and how to get money to those organisations.

“But our current tax laws in Australia prohibits that. And it’s a real shame because it’s a really critical role that community foundations can play.”  

ACF recently launched a COVID-19 National Crisis Response Fund, which has so far raised more than $40,000.

Sidey said ACF has been forced to turn down offers from private foundations to support the fund.  

“We have had at least three requests from private foundations [about] the national crisis response fund. They wanted to give to it, and they can’t,” she said.

“It’s not [about the money]. It’s about working together with private foundations and actually helping them get money through to grassroots community-based organisations, which community foundations have good local knowledge of.”

For several years now, advocates have been calling for all Australian community foundations to receive DGR1 tax status, which would enable them to receive funds from PAFs and distribute funds to non-DGR organisations.  

This call has been supported by the Foundation for Rural and Regional Renewal (FRRR), which provides significant support to the community foundation sector.

FRRR has DGR1 status, allowing it to receive funds from a community foundation and then distribute it to a non-DGR charity.

CEO Natalie Egleton told Pro Bono News that rather than negatively affecting FRRR’s work, giving community foundations DGR1 status would strengthen the whole sector.

“It would certainly enable FRRR to continue to partner with community foundations – potentially in a more strategic way – in addition to our work helping funding to reach the ground,” Egleton said. 

But she added that it was “not a silver bullet” for community foundations, noting there was a lot of work in being a DGR1 organisation, as there was in being a DGR2 organisation.

“FRRR regardless, will always be an ally and a partner for community foundations. We do see our role as having a capacity building function, particularly for the smaller community foundations,” she said.

“And we do provide a lot of support around governance, supply, partnership management advice etc. and that’s something that we’ll continue to do.”