COVID-19 relief efforts hampered by red tape burden

Advocates say struggling communities are having to wait weeks for crucial support  

Community foundations are calling for urgent deductible gift recipient (DGR) reform to make it easier for rural and regional charities to receive support during the COVID-19 crisis.

With charities facing sudden spikes in demand amid an anticipated fall in giving, philanthropy is stepping up to support the sector.

But because the majority of community foundations have DGR2 status, they are restricted to only giving funds to organisations that also have DGR status.

Advocates say while this causes headaches and inefficiencies in large metropolitan cities, it can be an insurmountable barrier in rural and remote communities where there is often a lack of suitable grant recipients – and where 80 per cent of community foundations are based.

Gerlinde Scholz, executive officer of Australian Community Philanthropy (ACP), told Pro Bono News that rapid responses on the ground during the crisis were being held back by the existing regulatory framework.

“Current rules introduce a time lag and produce a fee component to giving, which is really not the way you want to respond to a crisis like COVID-19 or the bushfires earlier this year,” Scholz said.

“Community foundations are working at the coalface of rural and regional communities that are being affected. And they often don’t have DGR entities in their communities that they can distribute funding to.

“They have small local charities that urgently need funding, but the funding cannot be distributed quickly because it has to go via a DGR1.”

Scholz said an ACP member has demonstrated that two weeks is the minimum timeframe for a DGR2 community foundation to make a grant to a local charity through current regulations.

The same grant could be given out much quicker if the foundation had DGR1 endorsement – which is usually confined to organisations that carry out charitable works and use tax-deductible donations to fund themselves.

Current regulations are also making it more difficult to attract funding.

Foundations would be able to raise and distribute more under DGR1, as they could take funding from philanthropic structures such as private ancillary funds (PAFs).

Scholz said the most obvious solution for the sector’s woes would be to create a DGR1 category for community foundations.

This would allow community foundations to distribute funding directly to beneficiaries in their local area.

She said this would ensure granting can happen more quickly and in a more responsive way.

“It would also potentially lead to increased funding for community foundations through PAFs, because that’s a growing sector where a lot of high-net-worth-individuals and middle class families are structuring their giving,” she said.

“Community foundations offer a very locally focused and a community engaged way of giving, and it’s frustrating that the current regulatory framework puts an intermediary in the middle of that relationship.”

This article has been updated to remove inaccurate information provided to Pro Bono News.