Winter newsletter June 2016

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Welcome from
Antonia Ruffell, CEO

Charitable donations are at the front of many people’s minds at this time of year. In this edition, you can read the story of the Unsworth family who provide some insights into getting involved with the organisations they support.   You can also read a thought-provoking article from Fiona Higgins who tackles the controversial issue of how much charities spend on administration, and the role this plays in your grantmaking decisions. 

The run-up to 30 June is always a busy time of year. We have had a substantial increase in the number of new private ancillary funds (PAFs) we’ve established and I’m proud to say that our team has developed a reputation for establishing a new PAF in lightning time. There’s also been a burst of activity with new sub-funds in our public ancillary fund (PuAF), the APS Foundation.

Activity has been further boosted by the recent changes announced by Treasury to the Private and Public Ancillary Fund Guidelines, which have introduced greater portability between PAFs and PuAFs. David Ward expands on this in his technical update, and Rachael Rofe comments on the growing popularity of public ancillary funds.

If you have any questions about any of the articles in this newsletter please feel free to contact the APS office on 02 9779 6300. 


Client Focus: The Unsworth Foundation

Garvan Institute for Medical Research: Left to right: Darrall Unsworth, Rod Unsworth, Professor Lesley Campbell AM, Jessica Rankin and Rohan Abayasekara 

When Rod Unsworth speaks about his family’s private ancillary fund (PAF), there are two words you’ll hear repeated often: getting involved. For Rod the key to making the most of his family’s philanthropic experience is being hands-on. It’s all about engaging with the causes, and finding ways to offer further assistance and resources beyond financial support. 

This has become an integral part of the Unsworth’s approach to giving, as Rod explains. “We look for active engagement where we feel that we can make a real difference and offer tangible help. We get so much more out of it than if we just supported with money. You don’t get nearly the satisfaction as you do if you have an active dialogue with the organisation. Actually I don’t know how you do it if you don’t get involved!”

Rod and his wife Darrall established their PAF, The Unsworth Foundation, in 2014. Prior to this the family had a more informal approach to giving, supporting various causes, mostly through involvement with charitable events. They also chose to support causes about which they felt a personal connection.

Darrall Unsworth has been partially deaf since childhood, as a consequence of contracting mumps at the age of 11, and for many years the Unsworths have been loyal supporters of the Royal Institute for Deaf and Blind Children (RIDBC). Since establishing their PAF, the Unsworths have grown their relationship with the RIDBC, visiting the organisation’s premises, and connecting with the executive. “We recently held one of our PAF Board meetings at the RIDBC offices, and afterwards we had a tour of the North Rocks (Sydney) premises. We also had a chance to discuss their strategic planning. Getting to know an organisation up close allows you to better understand what they’re trying to achieve.”

This closer relationship with the RIDBC has already had a positive outcome. “They wanted to put outreach centres in regional areas, and so we decided to fund some of the equipment in the new hearing testing centre in Port Macquarie. Their vision became our vision.”

Rod and Darrall have three adult children, two sons and one daughter. Their sons live in Perth and Paris, so they keep them informed of the work with their PAF. Their daughter, Jessica, lives closer to home and is involved directly with the Foundation’s work and the decisions about grantmaking.  The family chose to support medical research into Prader Willi Syndrome after a friend of Jessica’s had a child with the syndrome. This rare illness results in a range of health issues, the main one being the child is unable to regulate appetite, and they often become obese and can die young. The Unsworth Foundation has funded medical research into the illness via the Garvan Institute.

The grant is also of interest to Rod, who has a medical background as a pharmacist and has worked with pharmaceutical companies at an executive level for many years. Again, the family have taken their engagement that one step further, and have visited the Garvan Institute and taken a tour of the premises. Rod finds his background is also helpful when talking with the organisation’s staff about the illness and the research work.

Like her parents, Jessica enjoys a deeper engagement with the causes the family supports, and has become very connected with Coast Shelter, which offers assistance to families experiencing domestic violence on the Central Coast of NSW. The family has a holiday house in the area, where they spend a great deal of time, and felt it was a chance to help an organisation in their local community. Financially, the Unsworths have committed to supporting Coast Shelter over a three year period, with the grants from their PAF funding a triage person to assist families moving into accommodation. However Jessica decided she wanted to do more, and reached out to the organisation to ask if there was anything practical the children needed.

She was soon enlisting the help of her own children’s school, and gathered surplus uniform shop supplies such as bags, hats, and swimmers to donate. The CEO and team at Coast Shelter were delighted, as Rod explains. “They went on to ask us for other things they needed, which we were very happy to provide. Jessica has now organised toys, books, and food as well. We’ve helped where we can.”

The Unsworths’ hands-on approach takes time, but Rod feels the rewards are there. “I would encourage others (with PAFs) to think about not just giving money, but getting involved. It gives you a chance to get to know an organisation, which is very important because you then know if they’re adding value to the cause. It also gives you a sense of ownership to what you’re contributing.”

And Rod’s long-term view for the Unsworth Foundation? “It’s about the kids – and grandkids. I have six grandchildren who are severely advantaged! I don’t think of legacy in terms of public recognition, it’s more about transferring values and a sense of being part of a community and having broader responsibilities.”


Giving Insights
Fiona Higgins

‘I’m not interested in funding administration’

These words are often uttered adamantly at trustee meetings, but what do they really mean? In our experience, they can be code for:

1.  I am loath to fund certain elements of charitable administration, especially marketing and communications, fundraising collateral (appeals, direct mail, merchandise catalogues) and glitzy, high-cost events that might end up on the front page of The Australian.

2. I’m worried about control and impact. If I give an organisation an unrestricted grant, how will I know how it’s spent, and to what effect? Am I just contributing to consolidated revenue?

3. I don’t want to fund indirect charity costs – I only want to fund direct service provision.

The first two concerns are relatively easily managed through good communication with your grantees. It’s always your prerogative to stipulate your ‘no go’ areas for administration funding – and charities are generally accommodating of a donor’s wishes. As for control and impact, it’s good practice to develop a mutually agreed understanding of how progress will be charted over time – for any type of grant, and preferably before the funding is given.

The third objection is perhaps the most pervasive, despite the fact that Australia has no clear definitions around which of a charity’s costs should be categorised as ‘service-related’ and which should be understood as ‘administration’. As such, information about charitable administrative costs are not comparable and can feed unfounded assumptions – namely, that those charities with higher administration costs are somehow less worthy than those with lower overheads.

Intuitively, we all know that this premise is unsound. Adapting the old commercial adage ‘You have to spend money to make money’, in the for-purpose world we recognise that: ‘Good services are founded on good systems’. And good systems are usually funded out of the administration budget, which may scare off some funders. Yet if those same administration-averse funders are asked: ‘Are you prepared to help move a well-run organisation from good to great?’ the answer is usually a resounding yes! 

Whatever the size or scope of your grantmaking, perhaps it’s time to start paying more attention to an organisation’s capacity: that unique blend of leadership, governance and well-delivered programmes that will enable it to deliver social impact (and the budget it takes to support that) rather than focusing on administration costs.

It’s an idea echoed by Sarah Davies, CEO of Philanthropy Australia, who at the recent Generosity conference called on Australian philanthropic foundations to move away from the prevailing project-based funding model, and instead to embrace capacity-building and unrestricted funding. Her suggestion is grounded in a growing body of evidence that low administration costs do not necessarily signal that a charity is good. In fact, it can indicate the converse.

So what, in practical terms, does that mean for funders?

It means that if you already have a funding partner whose mission you support, with well-run programs and a track record of results, untied funding can be a transformative act of good faith for that organisation, a kind of enlightened generosity. By funding basic administration costs, you liberate that organisation to do more of what it already does well, without a funding straightjacket. You back the organisation, not the project. You fund systemically rather than sporadically. It could be your greatest gift ever.


Making the switch: 
PAF vs sub-fund

with Rachael Rofe

In the last fortnight, a small number of our clients have chosen to make the switch from a private ancillary fund (PAF) to a sub-fund in our public ancillary fund, the Australian Philanthropic Services Foundation (APS Foundation).  The transfer of the balance of their PAF to a sub-fund was not previously possible until the introduction of the new portability provisions covered by David Ward in this newsletter’s Technical Update.

Porting to a sub-fund is a terrific and welcome solution for philanthropists who want to retain structure around their giving, but seek the simplicity and ease of a sub-fund arrangement. You can also port from a sub-fund to a PAF, making a sub-fund a great initial structure for those wishing to build up a corpus over time to a PAF suitable balance.  Each of the clients who have taken advantage of the portability provisions and switched from a PAF to a sub-fund have done so because they either:

1. Want a more cost effective solution for their structured giving
When the balance of a PAF is less than ~$750,000, a sub-fund in a public ancillary fund can be a more cost effective option compared to a PAF. The APS Foundation fee is 1.025% of the sub-fund balance and is inclusive of all aspects of administration, compliance and investment management. On a fee basis alone, a sub-fund can be a better choice if the balance of your PAF is unlikely to grow beyond ~ $750,000.

2. Do not want the administrative responsibility associated with running a PAF
One client had an interest solely in grant making and did not want the administrative responsibility of serving as a Director, attending Trustee meetings and making investment decisions. A sub-fund allows you to continue your philanthropic program of structured giving whilst eliminating your responsibility for managing the giving vehicle.

All administration, investment and governance activities of a public ancillary fund are taken care of by the Trustee, leaving sub-fund holders to focus on the charities they would like to support. The sole responsibility of sub-fund holders is to make grant recommendations to ensure that at least 4% of the sub-fund is distributed in grants each year. 

3. Have concerns surrounding the succession of the control of their PAF on death or incapacity 
Private ancillary fund estate planning was an issue touched on in the previous issue of our newsletter and presents a real issue for those who may not be survived by persons they can or want to task with the management and control of the PAF when they are no longer able to do so.

A sub-fund offers an immediate solution to the question of management succession, with the Trustee of the public ancillary fund assuming all responsibility for managing the structure. In the APS Foundation, sub-fund holders can ensure their preferred program of grantmaking continues after their death by either nominating a successor to make grant recommendations for their sub-fund, or by preparing an Advanced Grantmaking Recommendation for the Trustee. The Trustee refers to this in endeavouring to make grants from the sub-fund to the organisations, for the purposes, and in the quantum specified by the deceased.

Public ancillary funds are becoming the preferred philanthropic structure for many philanthropists seeking a simple giving solution. A sub-fund can be established immediately, and there’s no set-up cost to do this. A transfer of a PAF balance to a sub-fund will not generate another tax deduction, but new donations are tax deductible. This means there is still time to make a tax deductible donation to fund your philanthropic work before 30 June!

To learn more about portability and the APS Foundation, please do not hesitate to contact APS on 9779 6300 or at



Technical Update

with David Ward 



Changes to private ancillary fund guidelines
The Assistant Treasurer has announced long awaited amendments to the private and public ancillary fund guidelines. The new rules include the introduction of portability for private ancillary funds (PAFs), greater clarity around impact investments and discretion for the ATO commissioner to approve a lower minimum distribution.

The PAF guidelines had not been touched since 2009. These recent changes are welcome and provide clarification on some areas of uncertainty while introducing some useful flexibility without disrupting the underlying framework.  The basics are unchanged and a PAF remains a simple and tax effective way to set up your own foundation. A founder donates capital into their PAF (normally starting with around $750,000) and gets a tax deduction for the donation. The capital is invested for growth in a tax free environment, and a minimum of 5 per cent of the value of the PAF assets is distributed as grants to charities each year. The foundation remains available to receive uncapped donations from the founder and his or her family.

PAF portability
One of the most useful changes allows a PAF to transfer all of its assets to a public ancillary fund, such as the Australian Philanthropic Services Foundation. This is known as portability and is discussed in this newsletter by Rachael Rofe.

Impact investments
The new rules bring greater clarity and innovation around how assets and financial instruments, such as loans, social impact bonds and guarantees, can be used to provide benefit to eligible charities.
The guidelines provide a series of examples including how PAFs can lend money or provide loan guarantees to eligible charities and that this can count toward the PAF's minimum annual distribution.   

Minimum distributions
One change that was considered was to the 5 per cent minimum distribution requirement for PAFs. This has been maintained but with the ATO Commissioner given new powers to approve a lower distribution in specific circumstances.

There were also a series of other changes including a further step to align ACNC and ATO reporting obligations as part of red tape reduction, broadening the definition of who qualifies as a responsible person, requiring potential conflicts of interest to be considered as part of the investment strategy and allowing smaller PAFs to be reviewed rather than audited.  Details were provided by the APS note on 5 May or  the Minister’s Statement


Upcoming events


Philanthropy Australia
2016 National Conference 21 - 22 September, Sydney
Evolution or Revolution: Is philanthropy future ready? 

An opportunity to engage with the world’s best philanthropic thinkers, strategists and leading voices from around the globe and at home. 

With an impressive line-up of speakers the conference will explore how philanthropy features in our changing society and what we need to do to stay ahead of the game. It will challenge thinking to help determine if we need a catalyst for change, to refine our way of doing things, or if we’re all on the right track. 


Making it Happen - Deals. Deep dives. Dynamics.

26 - 28 October 2016
Doltone House, Darling Island Wharf 
Pyrmont, Sydney

Momentum is building for the 2nd Impact Investment Summit with 5 stellar international speakers leading the line-up:

  • Ben Thornley, Co-founder and Managing Partner at Tideline (US)
  • Abigail Noble, CEO of The ImPact (US) 
  • Professor Durreen Shahnaz, founder of Impact Investment Exchange Asia (SGP)
  • Amit Bhatia, CEO of Impact Investors Council (IND)
  • Wolfgang Hafenmayer, Head of Societal Impact Advisory at Trusted Family (CH)