The Impossibility of Philanthropic Funding Decisions: The Australian Non‐Government Funder Experience

• DOI: http://doi.org/10.1111/faam.12020
• Author: Jim Rooney,Rodney Coyte,Benjamin Phua
• Published date: 01 November 2013
• Date: 01 November 2013

Financial Accountability & Management, 29(4), November 2013, 0267-4424

The Impossibility of Philanthropic

Funding Decisions: The Australian

Non-Government Funder Experience

RODNEY COYTE,JIM ROONEY AND BENJAMIN PHUA∗

Abstract: Non-government funders (NGFs) are major contributors to the third

sector. Literature on this private philanthropic world is limited and access to

stakeholders and practices within these institutions is a barrier to empirical research.

With public oversight limited to nominal federal tax law disclosure, issues of

accountability are under-researched. We examine how NGFs ‘account’ for their

grant making decisions in an Australian context. Focused on how NGFs assess likely

success, it finds that assurance is constructed as part of the decision-making process

through a more socialising form of accountability, based on personal interaction, in

contrast to a reliance on hierarchical accountability and transparency.

Keywords: third sector, non-government funders, accountability, Australia

INTRODUCTION

Recent academic literature and media commentary on the third sector1

highlights its growing significance, along with calls for greater accountability

(Chelimsky, 2001). In general terms, the academic literature has found that

approaches to the assessment, allocation and control of grant funding can result

in negative consequences for stakeholders (for examples, see Dixon et al., 2006;

and Goddard and Assad, 2006). In light of such findings,2it seems more research

on accountability in the sector is needed (see O’ Dwyer and Unerman, 2008).

As private philanthropic foundations, non-government funders (NGFs) are

a key organisational form in the third sector, representing approximately half

∗The first and second authors are from the Discipline of Accounting, The University of Sydney

Business School. The third author is from DBS Bank. They are grateful to Professors John

Roberts and Sue Newberry for their very helpful feedback on earlier drafts of this paper and

also thank the staff of the non-government funding organisations who participated in this

study.

Address for correspondence: Jim Rooney, Room 332, H69 – Economics and Business, The

University of Sydney, NSW 2006 Australia.

e-mail: jim.rooney@sydney.edu.au

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398 COYTE, ROONEY AND PHUA

of the reported assets of non-profit organisations in the USA (Lansing and

Yetman, 2006). Defined as distinct not-for-profit entities by many tax regimes,

their key characteristic is a focus on granting philanthropic funds sourced

from their own resources (Marten and Witte, 2008). Funds are primarily

dispersed to other not-for-profit organisations for services provided to the

ultimate beneficiaries of philanthropic assistance (Srivastra et al., 2010). Hence,

there is less demand for publicly available performance reporting by NGFs

(Lohmann, 2008). Moreover, in pursuing their philanthropic aims, foundations

face great difficulty in measuring outcomes from their grant giving (Bozzo,

2000). For example, in their support for education, welfare, disadvantage, health

and the arts, funding benefits may be affected by other factors, take years to

determine, and may not be assessable quantitatively. In common with public

sector organisations and notions of New Public Management (Lapsley, 2008),

the credibility of tools to assess potential and actual philanthropic outcomes is

questionable (Heinrich, 2012) and there is evidence in both the public (Pollitt,

2008) and third sector (Pterovits, 2006) literatures that community trust in

public performance disclosure is contested in the absence of direct participation

in philanthropic activities (Yang and Holzer, 2006).

Given this context, and limited funds available relative to funding applications

received, NGFs must make choices between grant applications in an attempt to

ensure ‘that the money is used responsibly’ and be ‘aware of what’s happening

to it’. The aim of this study is to establish how NGFs make, and account

for, their decisions, seeking to provide a more nuanced understanding of how

NGFs evaluate likely success of their grant making activities. It attempts to

better understand the scope and nature of accountability within NGF grant

decision-making practices. As a result, the focus is the formative context in

which accountability is established, namely, the grant application assessment

process.

The study examines assessment practices associated with the decision-making

activities in the funding of philanthropic grants by NGFs in Australia. A cross-

sectional field study was conducted by interviewing 14 key practitioners in 12

Australian NGFs. Publicly available documentation about the funding approach

and reporting systems of each NGF was also collected and analysed to provide

data triangulation and enhance the depth of analysis.

The study is framed by socialising concepts of accountability (Roberts, 1991;

O’Neill, 2002; O’Dwyer and Unerman, 2008; and Roberts, 2009), in particular,

Roberts’ (2009) notion of intelligent accountability. Rather than hierarchical

accountability, the nuanced decision making environment of NGF funding is

reflective of these concepts (Roberts, 2009) in which relationships, compassion

and trust are paramount. We find that NGFs initiate and maintain a socialising

form of accountability from the outset of their relationship with charitable

service providers (or non-government organisations (NGOs)) in the grant

application process. They create a context-specific remedy for the inadequacies

of the objective grant assessment criteria and written grant application.

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