Simple solution as charitable Trusts struggle

Liz Koh
Deputy Chair
Nikau Foundation

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.