Providence Philanthropic Foundation is a public ancillary fund. It may be a useful alternative for philanthropically-minded individuals who:
- Have insufficient funds currently available to make a PAF a viable option. We believe PAFs require a minimum of around $500,000 to be efficient whereas the minimum amount required to establish a ‘sub-fund’ in the APS Foundation is $50,000.
- Have an interest solely in grantmaking and would like to leave the administration, investment and statutory aspects of running a foundation to others.
- Would like their philanthropic fund to continue on past their lifetime but have no relatives to get involved in the administration and investment aspects that go with a PAF.
- The Providence Philanthropic Foundation can also accept donations of any amount from individuals who do not wish to establish their own sub-fund. In these cases, rather than allocating grants based on a donor’s request, the Foundation will solely decide on grant recipients.
The Foundation charges 1% per annum investment management fee on the amount held in each subfund with at least 50% of this fee rebated back into the Foundation. This fee is calculated on a monthly basis and deducted directly from the Foundation. A shared administration and compliance fee will also apply; $10,000 per annum plus a small audit fee will be shared across all sub-funds.
Once you have established a sub-fund you will be given online access to a variety of information to help you keep track of your activities. This will include the monthly value of your sub-fund, listing of donations and grants, six monthly investment report, annual audited accounts and various other useful reference materials.
The Public Ancillary Fund Guidelines 2011 allow, in certain circumstances and with the approval of the Trustee and the Australian Tax Office:
- The transfer of assets between public ancillary funds
- The transfer of the balance of a public ancillary fund ‘sub-fund’ into your own PAF. The Foundation trust deed provides for this flexibility.
Investment objective and strategy
The Trustee of the Foundation has complete control over all aspects of the investment objective, strategy and investments held. The Trustee’s decision in relation to such matters has taken into account the following:
- the need to donate a minimum of 4% per annum to eligible charities;
- the likelihood of inflation affecting the value of the investments and income generated;
- the risk of capital or income loss; • the liquidity of the investments;
- the costs of investment alternatives and transactions;
- the benefits of diversification of trust investments.
Furthermore, public ancillary funds are prohibited from:
- making investments that are not on an ‘arm’slength’ basis;
- investing in collectables;
- trading or operating a business;
- borrowing money (except in limited short term ‘bridging’ circumstances);
- providing security over any of its assets.
Taking into account the above, the investment objective set for the Foundation is to achieve a return after fees at least equal to CPI inflation + 4% per annum, measured over rolling 7 year periods.
The Trustee believes that the best way to achieve the investment objective is to invest a significant portion of the assets in growth-oriented investments (such as shares) with a bias at most times to Australian listed shares (because of the additional benefits from franking credits attaching to dividends).
The Trustee also believes it would be prudent to have some exposure to income-oriented investments (such as cash and/or fixed income securities), with an increased emphasis on such investments when sharemarket valuations appear stretched or where there appears to be a better risk/return trade-off in the immediate future from holding such securities.
Based on the investment strategy outlined above, the Trustee has decided that the broad investment ranges for the Foundation should be as follows:
20% – 80% Growth-oriented investments e.g. shares and/or property
20% – 80% Income-oriented investments e.g. cash and/or fixed interest securities
The full investment strategy document is available upon request.
Soon after the audit of the financial statements of the Foundation is completed each year (around October), the Trustee will write to you and advise you of the value of your sub-fund at 30 June, together with the minimum 4% that must be granted to eligible charities (or other eligible organisations) during that financial year.
You will then be requested to recommend to the Trustee the eligible organisations your 4% proportionate share should be donated to. The minimum donation is $1,000 per charity. You can ask the Trustee to grant more than the 4% minimum in any year if you wish.
As an example, if your sub-account balance was $60,000 at 30 June, then you would need to recommend to the Trustee $2,400 of grants before the following 30 June. Given the minimum grant to any one organisation is $1,000 this means you could ask the Trustee to make grants to no more than two eligible charities.
The Trustee of the Foundation welcomes and actively encourages donor involvement in identifying causes and organisations to be supported by grants. Expert assistance and specialist grant making advice is also available (at moderate extra cost). However, donors should note that under trust and tax law the final grant decisions ultimately rest with the Trustee.