As many of us who donate to good causes or who work in philanthropy know, our sector thrives on innovation. Funders in Aotearoa are often looking for new ways of working to reduce the hoops that our community groups have to jump through to receive funding. ‘Fundholding’ for community groups is one such innovation.
Fundholding is also known as fiscal sponsorship, auspicing or sitting under an ‘umbrella’ organisation. This is when a charitable organisation receives and holds grant money or donations on behalf of an unregistered group doing work a funder wishes to support. The organisation that receives the grant money initially is called the fundholder and they help the smaller group to account for and track the funds. The Gift Trust runs a fundholding service called Gift Collective, so we know a lot about how this works.
Fundholding has been around for a while, but lately has been picking up the pace. There are mixed opinions in the sector about whether fundholding is an acceptable practice, so we thought it was time to look at some misconceptions regarding this practice.
Misconception #1: Fundholding is for those groups that aren’t “good enough” to register as a charity
Charity fundholding services such as Gift Collective have a strict screening process for applications. They won’t accept any organisations that don’t meet New Zealand charity law requirements, so would in fact be turning away the same groups as Charities Services.
There are already around 28,000 registered charities in New Zealand – that’s a huge amount for a small population like ours. Not every group that does charitable work needs to be registered. For many smaller, grassroots groups, a much simpler option is to sit under an umbrella organisation who have more experience in the administrative and financial tasks that they need help with. That way, they can focus more on doing the good mahi, and less on the administrative duties involved in running a charity. Sitting under a fundholder is no reflection on the quality or charitable nature of a group’s work.
“We fund a number of organisations who have their funds held by fundholder organisations, also known as ‘umbrella’ organisations. For example, we support Te Ngākau Kahukura with the donation going through Ara Taiohi, which is the fundholder organisation.
Being umbrella-ed by a larger organisation helps smaller initiatives get on with their work without having to go through the arduous process of setting up a registered charity. We also find it is a useful and efficient way of supporting innovative work across the motu which may be new, or more suited to being supported by established organisations who have skills and expertise to share.”
The Tindall Foundation
Misconception #2: Fundholding is just a stepping stone to becoming a charity in your own right
This can be true. It is a difficult process to become a charity, and often takes a significant amount of time. There are plenty of fundholders that will happily take on a group that’s doing charitable work for a short term only, so that they can still receive and spend grants while they wait to gain charitable status in their own right.
However, this is not the path for everyone and there are plenty of groups who will stay with fundholders for the entirety of their existence. Not every project has a plan to scale up and go national or global. Some are as simple as one or two people running a charitable initiative – they don’t have a huge funding gap they need filled and they don’t have big operating expenses. Groups such as these would need to increase their paid staff hours and overheads to complete the tasks registering as a charity would entail.
“Wellington Community Fund is happy to utilise fundholder arrangements. Great work is happening right in our communities with grassroots groups like Adessa, Awatea Community Garden, Cuzzies in the Māra, and ARMSS. They show that you don’t need big funding or charity status to make a difference. Local engagement is what really counts! Not every organisation has to scale up—sometimes, the best impact comes from the heart of our neighbourhoods and having a fundholder can make it possible for smaller groups to get the resources they need to get on with their work.”
Wellington Community Fund
Misconception #3: A project can’t be as accountable if they’re going through a fundholder
In fact, the opposite is true! If a group is registered with a fundholder you are actually adding a layer of accountability, as it means an intermediary organisation (ie the fundholder) is also checking over the finances of a group and doing due diligence to make sure every expense meets charitable purpose.
It doesn’t add any extra work for you as the funder, to donate to an organisation via a fundholder. Some funders assume this would mean adding a two-tier regulatory check to their workload, but this is not the case. The fundholder will be doing checks of their own on the groups sitting under their umbrella.
Some funders deal with umbrella organisations so frequently that they have a fundholder agreement in place, as part of their application process. Wellington City Council is one of these, and their umbrella agreement form has been used at WCC since the early 2000’s – with longstanding relationships with a number of entities within the arts and community sector who have over the years supported people to get access to funding.
“Our pūtea is important, and comes from rates funding. We need to be completely sure that it’s making the most difference – alongside valuing youth, innovation and commitment to an idea or a cause. We have had long standing relationships with many fundholders who typically act as champions and mentors to groups as well as providing a financial umbrella and assurance to funders.
It can be easy for people with established connections in community settings to find a larger charity to act as a fundholder. Guaranteeing access to a fundholder promotes a more equitable way of funding.”
Mark Farrar – Business Performance Manager, Wellington City Council
Misconception #4: If a project can’t even run their own admin, they won’t be good enough to fund
Rare though it is to find funders who don’t want to fund organisations working with fundholders, there are a few who have said, “if they don’t have their own bank account and invoicing systems, they won’t be organised enough to fund”.
Some of the most effective charitable groups are those run by the community, for the community. Locally led, iwi and hapū led, and Pasifika-led organisations have proven themselves to be pivotal in helping funders reach their target outcomes. Not every group should need to have a bank account or an accounts manager on hand in order to be funded. Fundholders can provide that function as part of their support. Skills such as leadership, community building and engagement often take the lead in smaller charities. Having a fundholder manage the maintenance and distribution of funds to cover costs can make a charity more economical, saving them from opening a bank account with multiple signatories or hiring an accounts manager for only two hours a week! By sitting with a fundholder, these groups can have the financial admin handled for them by experts, giving them more time to do the mahi that matters.
“Our Gift Collective initiative has grown in the past few years, like one of the many garden and forest initiatives we host, and we now fundhold for over 100 groups across the motu. Our team are experts in charitable administration and financial management, and we are therefore well placed to help these groups with this work, while they get on with their important mahi in the community. The transparency of the Gift Collective platform shows how the funding is being spent and every transaction, making it easy for funders to see what work is being done.”
Cheryl Spain – Executive Director, The Gift Trust
Misconception #5: Fundholders have too much control over groups they auspice
Some funders have expressed a concern that if they fund a group sitting with an umbrella organisation, that organisation would have too much control over the project and they won’t get to deal directly with the people doing the mahi. This is an interesting question as it can vary. A charity fundholding service, such as Gift Collective, does not oversee the day-to-day running of the organisations under its umbrella, they simply exist to help with financial administration and compliance. Any funder seeking a fundholder for a group should probably verify what that fundholder’s involvement is. As a general rule, fundholders provide a support system, but don’t drive the work itself – a kaupapa belongs to the auspiced group and is theirs to run however they wish, as long as they keep their charitable purpose in check.
“In 2021, a number of funders met with seven rōpū in a small rural town. Their presentation to us was outstanding, and collectively portrayed a “successful Māori-led” model of Whānau Ora. Most of them weren’t registered charities so we approached another local charity to hold funds for them. A percentage was paid to the fundholder to distribute and hold the funds. Within the Fundholder Agreement it states that “each group is in control of their own projects”. The fundholder ensures that legal documents are signed, a six-monthly report is provided to funders, and an annual ā tinana (in person) celebration and update is held over lunch in their town.”
J R McKenzie Trust
As with any trend in philanthropy, fundholding won’t be for everyone. But for the growing numbers of donors and philanthropic trusts supporting community led initiatives through fundholders around the country, it’s a unique opportunity to engage with the smaller, the hapū and iwi led, the Pasifika led, the rainbow and the local. And to engage in a way that makes their work easier rather than more complicated.
For more information on fundholding in all its shapes and forms, visit Gift Collective.
