Innovation in philanthropy: Creating the Mornington Peninsula Foundation
Poverty, disadvantage and lack of opportunity are wicked problems in any community. However, the problems are often magnified in regional areas, where there’s historically been significant underinvestment in the social networks and infrastructure that provide support to those in need.
Often, this gap has been filled by locally-based community organisations, operated by passionate people who are deeply embedded into their communities. They deliver impactful and effective social programs, but they often really struggle to raise the necessary funds to make them sustainable.
This is exacerbated where the organisation doesn’t have endorsement as a Deductible Gift Recipient (DGR). The lack of DGR status cuts them off from receiving funding from private and public ancillary funds (PAFs) which have grown in reach and prevalence over recent years. It also limits their support from private philanthropy.
Place-based funding models
An innovative approach to assist regional communities in tackling severe disadvantage and wicked social issues, through supporting community-based, ‘grass roots’ organisations has recently been developed in the Mornington Peninsula and in Shepparton, Victoria.
It has been designed in both places as a Public Benevolent Institution (PBI) structure, which allows it to engage and collaborate with community based organisations, to deliver programs for the relief of that area’s significant social disadvantage. This model allows worthwhile and impactful community projects to be properly funded and efficiently delivered because they can now achieve support from PAFs and philanthropists that want to improve outcomes for their own communities.
The Hunger Project case
The opportunity to develop a place-based funding model came about as a result of the 2014 decision of the Full Federal Court in the Hunger Project case. This was a significant decision because it recast the accepted view over many years; that a PBI had to be involved in the direct delivery of benevolent relief through project execution, as well as raising the funds for that delivery.
Hunger Project Australia (HPA) was part of the ‘Global Hunger Project’. This initiative saw partner entities in first world countries raise funds to be distributed through associated entities into developing nations. HPA was a partner entity, and its most substantial activity was raising the funds in Australia.
Courts have always reinforced that a PBI must be an institution organised for the relief of poverty, sickness, destitution or helplessness. On this basis, the Commissioner of Taxation held the view that a PBI must provide its aid and services directly to people in need of benevolent relief. The Commissioner of Taxation took the view that HPA failed to meet this test, arguing that to be a PBI, you must provide aid and services directly to people in need of the benevolent relief. The Commissioner therefore refused HPA’s application to be endorsed as a PBI.
HPA challenged the Commissioner’s decision in the Federal Court, with a final determination being made on appeal to the Full Federal Court.
The Court held that just because the institution did not itself directly provide the relief, but did so via related or associated entities, was no impediment to it being a PBI. Accordingly, an institution may be endorsed as a PBI where its primary business activity is raising funds for distribution and used by partner entities, which may be associated or not, in programs that provide benevolent relief to the people in need.
The regulator’s view
Following the Hunger Project case, the Commissioner of the Australian Charities and Not-for-profits Commission (ACNC) released an Interpretation Statement. In that, the Commissioner emphasised that that the Court’s decision did not change the definition of the term ‘institution’, which still requires structure, permanence and activities.
The Commissioner continues to apply the criteria for an institution rigidly.
Accordingly, any organisation applying for PBI status must have a considered and appropriately detailed business plan, and established relationships with the associated charities and not‑for‑profits which will actually provide the benevolent relief.
Our success stories
Hall & Wilcox has assisted in the establishment of two such PBIs since the Hunger Project decision that operate on a place-based partnership model. These are the Mornington Peninsula Foundation and the Greater Shepparton Foundation.
In both cases, they have been endorsed as a DGR-1, and upon commencement of operations, the community foundations operating in those areas (which were DGR-2s) have merged into the DGR-1s.
The Mornington Peninsula and Shepparton both have higher than average youth unemployment, welfare dependency, homelessness and poor educational outcomes. Both places are above the State average on a number of measures in social disadvantage.
The Mornington Peninsula is for many the affluent playground of Victoria. What is not known by many are the levels of disadvantage which exist in a number of its local communities.
Mornington Peninsula example
The Mornington Peninsula Foundation was established as a PBI in 2017 to ameliorate and provide a focus for philanthropy in that region. It operates an innovative, place-based social collaboration model, which involves partnering with local organisations to conduct and fund projects that target the specific needs of the various communities. These include early intervention in education, support for homeless and disadvantaged families, and improving outcomes for literacy and numeracy in five primary schools and kindergartens through focusing on oral language,
The Foundation attracts deductible gifts from members of the public and PAFs. It then partners with a number of community organisations in the region, as well as co-designing projects, assisting in project delivery and monitoring acquittals.
The locally-based Foundation 59, which has been operating for 9 years as a DGR-2, merged with the Mornington Peninsula Foundation in 2018.
Shepparton experiences significant disadvantage in a number of areas, and under-funded grass roots not-for-profit organisations are trying hard to change outcomes, but have been severely underfunded.
With this new model, we have facilitated the creation of the Greater Shepparton Foundation as a PBI, which in turn has merged with the Goulburn Valley Community Fund (a DGR-2) to become the apex of philanthropy in the Greater Shepparton region.
Both Foundations are examples of how this place-based social collaboration model can drive direct funding, and engagement that would not otherwise have been available to organisations in those communities to deliver better projects, with sustainable funding and increased accountability. It has allowed each of these Foundations to target the wicked social issues that are so destructive to many families.
The use of this model enables those people, families and organisations that are committed to enhancing the quality of life for everyone in their community to provide a funding vehicle which has never been available before.
You might be also interested in...
Tax | 18 Oct 2019
This week in Talking Tax we take a look at the High Court’s long-awaited decision in the Sharpcan appeal and the recently announced NSW land tax amnesty.
We also consider a draft PCG on the ATO’s compliance approach to GST apportionment of acquisitions that relate to certain financial supplies and the ATO’s decision to appeal the Federal Court’s decision in the Glencore transfer pricing case.
Tax | 25 Oct 2019
This week, we look at draft legislation introducing changes to the age limit for genuine redundancy payments, luxury car tax refund entitlements and interest on ATO superannuation payments.
We also consider a draft Taxation Determination regarding the exclusion of capital gains from the FITO limit, and summarise the AAT’s decision in a recent case regarding a taxpayer’s failure to prove assessments were excessive.