Founders,Families,and Futures: Perspectives on the Accountability of Australian Private Ancillary Funds

Abstract

This research explores perspectives on the accountability of Private Ancillary Funds (PAFs), a type of Australian endowed philanthropic foundation. PAFs are relatively new giving structures that have experienced strong growth over the past 15 years. With limited regulatory obligations and exemptions available from public reporting, PAFs have discretion in various forms of public accountability. Using Ebrahim’s conceptual framework of nonprofit accountability, this study explores PAF accountability in terms of to whom, for what, how, and why, examining tensions between PAFs’ private form and public purpose. Through in-depth interviews with managers and trustees of 10 PAFs, findings reveal that PAFs engage in accountability for internal reasons relating to their mission and purpose, and their desire to lead others in philanthropy. PAFs are influenced by philanthropic peers, in particular other PAFs; but their accountability does not necessarily include public disclosure or transparency. Four variations to Ebrahim’s accountability framework are proposed.

Keywords

accountability philanthropy foundation Private Ancillary Funds Australia

Private and independent, philanthropic foundations in Australia have historically not been subject to scrutiny from government, beneficiaries, or the general public including through the tax office (Leat, 2004). In a comparison with the United States, Leat (2004) finds a relative lack of concern with accountability and governance in Australian foundations for reasons including notions of privacy, lack of data and debate, unquestioning trust in charities, and broad disinterest from successive governments and the general public.

Private Ancillary Funds (hereafter PAFs) are a unique subset of philanthropic nonprofit organizations established to provide grants to nonprofit organizations endorsed by the Australian Taxation Office (ATO) as public benefit entities. This simplified philanthropic trust structure has attracted new donors (McLeod, 2013, 2014b), and “deepened philanthropic giving in Australia” (Edwards, 2009, p. 3). More than 1,200 PAFs have been created with a combined capital value of approximately AU$4 billion¹ as at December 2014 (McLeod, 2014b, p. 3), significantly expanding and changing the philanthropic sector. However, growth in this sector has also resulted in growing concerns regarding their lack of public accountability (Cham, 2014).

By nature of their wealth, PAFs have qualities such as power, influence, independence, and longevity that make them a distinct and compelling context in which to explore the concept of accountability (Coyte, Rooney, & Phua, 2013). Having endowments, PAFs exist free from the imperative to continually secure income that is the survival focus of both for-profit and most nonprofit organizations. Hence, they occupy a unique place in the nonprofit sector. However, there is a lack of research on PAFs, and this study begins to address this deficit by exploring how accountability is understood and practiced by trustees and senior managers in endowed philanthropic foundations such as PAFs, whose purpose is pro bono, survival is assured in perpetuity, and legal and regulatory requirements are minimal (Coyte et al., 2013).

An underlying assumption regarding accountability is that it leads to learning, change, and improvement (Carman, 2010). Without accountability, nonprofit organizations including endowed philanthropic foundations “have no way of knowing how well they’re doing at fulfilling their mission” (p. 268). The aim of this study is therefore to map the nature and forms of accountability in PAFs, given claims of limited accountability (Cham, 2014) and the scant research on this growing sector (Coyte et al., 2013).

Background and Research Context

Definitions

Although there is no single accepted definition for philanthropy, modern definitions characterize it as an external activity rather than an internal state or disposition motivating such acts (Sulek, 2010). For the purposes of this study, Salamon’s (1992) widely accepted definition of philanthropy as “the private giving of time or valuables for public purposes” is adopted (p. 10). Similarly, the term “foundation” has no defined meaning in an Australian context, including the law. However, a simple and pragmatic definition provided by Dufton (2014, p. 2) is “institutions set up for public benefit which have their own funds. In practice most of these operate as grantmakers” .

Historical Background and Research Context

In 2001, a new philanthropic structure was created in Australia with the aim of encouraging philanthropy by making the establishment of a charitable trust or foundation quicker and more attractive to wealthy donors, including individuals, families, and companies (McGregor-Lowndes, 2000). Prescribed Private Funds² (PPFs) offered multiple tax advantages, including tax deductibility of donations to them, and exemption from income tax. PPFs (renamed PAFs in 2009) have some similarities with private family foundations in the United States and in Europe (McGregor-Lowndes, 2014) in that they are established for public benefit purposes but do not have public fundraising requirements. However PAFs also have minimal public reporting requirements, and so may remain private and invisible from the public eye (Cham, 2014).

PAFs are required to have at least one external director or trustee, to be audited, and to provide an Annual Information Statement (AIS) to the Australian Charities and Not-for-Profits Commission (ACNC) (Ward, 2009). However, individual PAFs are able to request their details not to be made publicly available,³ so this form of reporting does not necessarily impinge on the privacy of the founder or trustees, nor does it contribute to public accountability through transparency. The exemption from compulsory disclosure through the ACNC (2012) Register is intended to “protect the privacy of individual donors and philanthropists and prevent an unreasonable administrative burden being placed on charities, while still ensuring appropriate levels of transparency and accountability” (p. 2).

PAFs are regulated by the ATO, which has the power “to suspend, remove or replace trustees of PAFs that breach the guidelines or other relevant Australian laws” (Australian Government Treasury, 2009a, p. 2). Furthermore, the Commissioner of the ACNC can revoke the charitable status of a PAF.

PAFs are required to have corporate trustees⁴ (the individual directors of which are informally referred to as “trustees”). Trustees have duties and responsibilities that can be broadly categorized as administration, grantmaking, and investing (Ward, 2009). Administration includes reporting as required under regulations, and managing a PAF’s existing portfolio of grants.⁵ Grantmaking includes distributing each year a mandated minimum of 5% of the net asset value of the fund (as at the end of the previous financial year); granting only to eligible organizations and for the public benefit purposes set out in the trust deed. Investing includes the establishment of and adherence to an investment policy and any investment limitations in the deed or PAF guidelines⁶ (Australian Government Treasury, 2009b).

Beyond these limited formal regulatory requirements, additional forms of accountability are largely discretionary. A PAF with a private orientation may choose anonymity and nondisclosure wherever possible, allowing almost no public profile and remaining silent about its work. In contrast, a PAF with a public orientation may voluntarily disclose extensive information about its mission, investments, partnerships, and grantmaking through a website, and actively promote its work. The clear distinctions between these two approaches to accountability, both of which comply with regulatory requirements, emphasize the extent to which accountability to the public is optional for PAFs and why a deeper understanding of perceptions of accountability within PAFs is important.

Review of Accountability

Accountability is an opaque concept, and many authors have described the complexity and confusion imposed on researchers by the lack of a clear definition. Blind (2011) describes accountability as “an amorphous concept that is difficult to define” (p. 2); and Sinclair (1995) refers to “the chameleon of accountability” (p. 219). It is notable that few authors attempt or propose a new definition of accountability, but instead reference or build on those from previous scholars.

However, this lack of a commonly accepted and understood definition allows space for nonprofit organizations including philanthropic foundations to develop and adopt their own interpretation of accountability, beyond the limited legal and regulatory requirements. Most working definitions of accountability include some or all of the concepts of responsibility (Cooper & Owen, 2007), reporting (Cooper & Owen, 2007; Gray, Bebbington, & Collison, 2006), transparency (Roberts, 2009; Tyler, 2013), being answerable (Gray et al., 2006), and accepting consequences or sanctions (Mashaw, 2006). In a philanthropic context, where the underlying assumption of “pro bono publico”⁷ is enshrined in the charitable status of foundations, Roberts’ (2009) definition of accountability as “a social practice through which to insist upon and discover the nature of our responsibility to and for each other” may be most appropriate (p. 969).

Underlying its fluid nature, there are many related concepts linked to accountability in the literature. Most prevalent among these is transparency. Although transparency is sometimes used as a synonym for accountability, there are difficulties and contradictions inherent in this pairing. “Transparency becomes problematic only when we believe in its perfection; when we believe or act as if all there is to accountability is transparency; that transparency is adequate and sufficient as a form of accountability” (Roberts, 2009, p. 968). Similarly Liket (2014) describes transparency as only providing one piece of a larger puzzle of accountability. Other authors make the distinction that transparency is passive, while accountability is active: “transparency then becomes accountability by turning measures into targets” (Roberts, 2009, p. 962).

There are also negative aspects to transparency and accountability highlighted in the literature. Rourke (2014) expresses concern about stakeholders’ ability to make sense of a large volume of data—the concept of transparency as “data dump.” Blind (2011) highlights the often binary nature of forms of accountability, noting “the literature on accountability has been dominated by dichotomous understandings” (p. 1). These dichotomies are unhelpful in understanding the complexities and nuances of accountability relationships. Recognizing this, Blind (2011) argues in favor of a focus on “linkages and convergences” and suggests an accountability spectrum where forms and structures are flexible and vary over time and within contexts (p. 1). This networked or rhizomatic understanding of accountability (Egan, 2014) is particularly suited to nonprofit organizations.

Much of the existing literature on philanthropic accountability contends that accountability is dependent on the extent to which a foundation is considered to be a public or private entity (Fernandez & Hager, 2014), and its subsequent responsibility (or absence thereof) for public transparency and reporting (Rourke, 2014; Tomei, 2013). Brody and Tyler (2010) argue strongly that philanthropic autonomy and independence is undermined by contentions that foundations’ assets are (at least in part) public money, to the detriment of foundations pursuing their chosen charitable purposes in a pluralistic society. The discretionary public accountability practiced by Australian PAFs therefore positions them within the larger debate around the influence of private wealth with a public dimension or element within democratic societies (Leat, 2016).

Turning to broader frameworks of accountability, Ebrahim (2010) considers three questions: accountability for what, accountability to whom, and accountability how. This relatively simple and open conceptual framework is suited to the exploratory nature of this abductive research (Timmermans & Tavory, 2012) and provides an open but comprehensive structure through which new aspects and elements of PAF accountability may be investigated.

Under the question “Accountability to whom?” Ebrahim proposes upward and downward, or vertical accountability as being of particular interest to nonprofit organizations, following the flow of money in and out of the organization. Horizontal or internal accountability refers to an organization’s accountability to its board or governing body, and to its mission. Furthermore, an additional question concerning “why is accountability exercised in philanthropic foundations?” is included, providing the opportunity to explore motivations and purposes for PAFs in engaging in accountability, given the largely discretionary nature of public accountability in this context.

Method

In-depth, semistructured interviews were undertaken capturing detailed and nuanced perspectives of accountability from managers and trustees of PAFs. Described by Yin (2014) as shorter case study interviews, these were open-ended and adopted a conversational manner, but nevertheless followed a protocol. A semistructured interview method corresponds with a localist perspective (Alvesson, 2003) where the interview provides a “social construction of situated accounts” (Qu & Dumay, 2011, p. 240) specific to the interviewee’s individual experience of PAF accountability. An interview protocol of 10 open-ended questions formed a flexible structure for each interview. Semistructured interviews are appropriate for exploratory qualitative research as additional questions can be included to probe emergent themes (Eisenhardt, 1989).

Recruitment of participants is difficult in the area of private philanthropy (Coyte et al., 2013) particularly given PAFs are not required to disclose their contact details.⁸ Although a list of registered PAFs is publicly accessible (though not widely known) through the Australian Business Register online, no contact information is provided. Furthermore, questions around accountability may be sensitive. Accordingly, one key person in the philanthropic sector in each of three states (South Australia, Victoria, and Queensland) was initially approached and asked to contact known managers or trustees of PAFs in their state. Three states were deliberately included to ensure these data were not reflective of a particular geographic and/or cultural community. Further interviewees were recruited using a snowball sampling method (Biernacki & Waldorf, 1981), appropriate for this notoriously private and difficult to reach group (Coyte et al., 2013). Involvement was purely voluntary, with participants electing to contact the researcher directly to take part.

The sampling frame was the population of 1,240 registered PAFs in Australia (as at December 2014 when data collection took place). Among this small and hidden population, a final sample of 10 PAFs was secured including small, family-based organizations with no paid staff; and larger organizations with staff and/or managers. The earliest establishment date for PAFs included in the sample was 2002, the year after their introduction, and the most recently established was in early 2014.⁹ Although the sample represents a small percentage of the population, the research design was focused on rich insights (Weick, 2007). Given the small sample size, it is acknowledged that findings cannot be empirically or statistically generalized to the population of PAFs or other foundation types. As this is an interpretive article, theoretical generalizations are instead drawn.

Interviews were conducted in-person; with a total of 11 participants (one PAF had two participants). Managers or trustees were interviewed; as they were very familiar with the organization’s accountability relationships and associated activities. Of the six trustees who participated, four were designated as the Responsible Person¹⁰ on the board, and one was also the founder of the PAF. Ethics approval was received and written consent was obtained from all participants. The average duration of the interviews was 57 min (ranging from 33 to 80 min).

Audio recordings of the interviews were transcribed verbatim with one professional transcriber working on all 10 interviews for consistency. Thematic coding was then undertaken using NVivo (Version 10 for Windows). The data were coded to four theory-driven codes (Fereday & Muir-Cochrane, 2006) based on the four research questions developed from Ebrahim’s (2010) conceptual framework. Open or thematic coding was also undertaken as an iterative process to closely examine the data, categorizing phenomena by theme and searching for patterns (Seale, 1999). The appendix summarizes the theory and data-driven codes identified through this process. The final stages of the analysis comprised reduction and triangulation of the data, to summarize and illustrate the findings. Theoretical saturation was achieved in the interviews, in that each of the last few interviews undertaken added only incrementally to what was already found.

Findings

Accountable to Whom?

Trustees and managers of PAFs identified a wide range of individuals, groups, and organizations to whom PAFs were accountable. The three most frequent themes were that PAF managers and trustees felt accountable to their beneficiary organizations, to the ACNC, and to the ATO. Other stakeholders or actors to whom PAFs felt accountable included the general public, the philanthropic sector, the children of the founder, the board of the PAF, a geographic community, other trusts and foundations, and the ultimate beneficiaries of the PAF (i.e., individuals or groups that were the clients of the organizations directly funded by the PAF).

There was a distinction between accountability commonly practiced in the operational sense with beneficiary organizations (most frequently identified by PAFs as to whom they were accountable), and accountability perceived at the level of mission to the ultimate beneficiaries (ranked lowest in Table 1). Most PAFs had little direct contact with their ultimate beneficiaries, and engaged with them only through the grantee organizations. One respondent, however, detailed a careful process of engagement and direct dialogue with these communities, not necessarily through the intermediary of the grantee organization. This PAF communicated directly with the ultimate beneficiaries of its grants, to ensure the programs and projects funded were not being imposed upon them. This process of seeking out the views of individuals and communities and entitling the beneficiaries of the grant to a voice in the PAF’s grantmaking was distinctive among the interviewees.

Table 1.

To Whom Do PAFs Perceive They Are Accountable?

Individual, group, or agency	Definition	Number of references (sources/10)	Example quote from PAF manager or trustee
Beneficiary organizations	Organizations endorsed as DGR Item 1¹¹ by the ATO	23 (9)	What we try and do is set ourselves a high standard of interacting with grant seekers and grantees (Manager, PAF 8, 2014)
ACNC	Australian Charities and Not-for-Profits Commission	21 (10)	. . . Accountability, I think it’s [at] a comfortable level . . . reporting to the ACNC . . . I wouldn’t want more. So probably the current level seems to suit the board (Trustee, PAF 4, 2014)
ATO	Australian Taxation Office	17 (7)	To be a legitimate PAF your primary responsibility is to the tax office (Manager, PAF 8, 2014).
General public	The Australian community or population as a whole	16 (7)	So one of the primary accountabilities would be [to] the general public community (Manager, PAF 10, 2014)
Philanthropic sector as a whole	The individuals, groups and organizations involved in philanthropy	11 (7)	. . . actively talking about what we’re doing and encouraging others to look at what we’re doing, to be seen as leaders in the field . . . (Manager, PAF 1, 2014)
Founder’s children	The first generation descendants of the founder(s) of the PAF	10 (5)	I might say, well I set this foundation up as a legacy for my children . . . therefore I’m accountable to them to make sure that it works well, is functional and is there for them to participate in (Manager, PAF 10, 2014)
Board of PAF	The individual directors (known as “trustees”) of the trustee organization for the PAF	8 (6)	The other stakeholders are obviously your fellow board members—doing the right thing by them (Trustee, PAF 6, 2014)
Geographic community	A community defined by a geographic area	8 (5)	So there’s always a very strong [question] you know, does this benefit [the state] and [the city]? (Manager, PAF 10, 2014)
Other PAFs	PAFs other than the participant’s fund	8 (4)	. . . there’s talk about everyone in that network or that group [of PAFs] disclosing what they distribute, and disclosing what they support . . . the whole idea is that we talk, we engage, we help each other (Manager, PAF 1, 2014)
Ultimate beneficiaries	Individuals or groups who are clients of the organizations funded by the PAF	8 (2)	The community that’s going to receive the benefits is a huge one [regarding our accountability] because we like to support things at a grass roots level . . . We do feel responsible to them (Manager, PAF 8, 2014)

Note. PAF = Private Ancillary Funds; DGR = deductible gift recipient; ATO = Australian Taxation Office; ACNC = Australian Charities and Not-for-Profits Commission.

Of the 10 actors or agencies to whom PAFs perceived the most accountability, only two (founder’s children, and board of the PAF) were internal to the organization, demonstrating a clear external focus for PAF accountability as a whole. Findings revealed a number of emergent themes, summarized in Table 1, ranked by the number of references coded to each theme, as an indication of its prevalence in the data.

Accountable for What?

The activities central to how PAFs achieve their mission can be broadly divided into grantmaking and investments. These two activities were most commonly identified by managers and trustees as “for what” PAFs are accountable. In addition, accountability for governance was noted by many respondents, specifically the internal management of the PAF, and managing risk. For example, the importance of having risk management strategies and policies in place (accountable for what?) is distinguished from the tools, processes, and mechanisms (accountable how?) by which that strategy or policy is enacted. The range of activities identified is summarized in Table 2, grouped by Ebrahim’s (2010) four categories of finances, governance, performance, and mission.

Table 2.

Activities for Which PAFs Perceive Themselves Accountable.

Accountable for what? (category)	Definition	No. of references (sources/10)	Example quote from PAF manager or trustee
Grantmaking or allocation of distributions (performance)	Deciding how much will be granted and to whom, based on the mission and values of the PAF	26 (9)	A lot of my giving in the past has been reactive—Whereas this is much more . . . considered, yes—I’ve got the deciding vote here so that’s quite a different mind-set (Trustee, PAF 9, 2014).
Investments (finance)	Determining investment policies and procedures of the PAF	23 (10)	It’s a social investment but it’s also about making a statement to other philanthropists that these things should be contemplated and indeed done wherever possible (Manager, PAF 8, 2014).
Managing risk (governance)	Systems for identifying and addressing risks or uncertainties affecting the PAF	19 (6)	. . . we just want to know what the risks are and what we’re dealing with (Manager, PAF 8, 2014).
Conserving resources (finance)	Deciding how the PAF’s resources (both money and time) should be used most effectively	13 (7)	Her [the founder’s] frugal nature means that she does not agree with spending money on the administration of the foundation (Manager, PAF 10, 2014).
Capacity and sustainability of beneficiaries (mission)	Enhancing and supporting the ability of nonprofit organizations to achieve their mission	10 (4)	. . . trying to work out what is going to help the [beneficiary] organizations . . . wanting to fund things that other people don’t fund—admin salaries—all the unsexy stuff that we . . . know are the real drivers of an organization (Trustee, PAF 4, 2014).
Maximizing benefit to ultimate beneficiaries (mission)	Focusing on the impact and benefit of a grant to the individuals or groups that are the clients of the beneficiary organization	8 (5)	I’m changing the wellbeing of children and so it’s not just about the education development, it is about their wellbeing and how they can deal with resilience (Trustee/Founder, PAF 3, 2014).
Internal management of PAF (governance)	Improving the effectiveness and efficiency of the management and governance of the PAF itself	8 (4)	I take that accountability very seriously as to expenses that are run through the foundation. (Trustee/Founder, PAF 3, 2014).

Note. PAF = Private Ancillary Funds.

Accountable How?

The research question “accountable how?” examines the ways in which PAFs are accountable, or the mechanisms by which accountability is achieved. Consistent with Ebrahim (2010), themes are categorized in Table 3 as either “tools” (used at a point in time), “processes” (used over time), or both. Using reporting and performance measurement as an example, it becomes apparent that individual mechanisms may be a process for a PAF, but a tool for a particular beneficiary. Assessment by the PAF of the impact and effectiveness of a grantmaking program is an ongoing accountability process; however, a report from a beneficiary organization on a single grant is an accountability tool. Likewise, the accountability mechanism of site visits is a process that takes place repeatedly over time for a PAF, but a tool when applied to a single beneficiary organization.

Table 3.

Ways in Which PAFs Perceive They are Accountable.

Accountable how? Mechanisms	Definition	No. of references (sources/10)	Tool or process	Example quote from PAF manager or trustee
Performance measurement and reporting by beneficiaries to PAFs	Measurement and/or narrative reporting on outcomes of funding	16 (8)	Process (for PAF) ), tool for beneficiary organization	We have an evaluation form which we ask our partners to complete (Manager, PAF 1, 2014)
Disclosure, transparency	Voluntarily making information about the PAF publicly available	10 (5)	Process	So the more we can in an attractive, stylish way tell the world what we’re doing, the better . . . No-one wants to be aggressive and start bragging, but if we just say, “This is what we are doing” (Trustee, PAF 6, 2014)
Site visits, engagement, attending events	Visits by PAF trustees or managers to the operational site of the funded programs or events	10 (5)	Process (for PAF), tool for beneficiary organization	It’s a gut feel, you know, [that’s why] you’ve got to go out and do your site visits (Manager, PAF 5, 2014)
Due diligence on possible beneficiaries	Investigation of the financial status of grant applicants before making a grant	10 (4)	Tool	. . . whether it’s [an application for] $10,000 or $1 million, it has a financial health check . . . the net assets, their profit and loss, their liquidity and their long-term viability and their working capital—so how much money they’ve got to keep going and for how long (Manager, PAF 8, 2014)
Openness to inquiry and discussion	Willingness to listen and to ask and answer questions	8 (3)	Process	They say, “here’s where we want to be in five years” and . . . “here are the ten strategies that are going to get us there” . . . Okay . . . which one of those ten do we believe will help them . . . [and] help our foundation’s ambitions? If there is one, let’s zero in on it and say, “Well how can we help you, with money but also in other ways, to fulfil on that strategy?” (Trustee, PAF 9, 2014).
Grant agreements	Written agreements between a PAF and a beneficiary	8 (3)	Tool	These gentlemen agreements are all very well . . . but for me I say okay, where are the formal pieces of paper, where’s the writing that says this is what you said you were going to do? . . . I think setting up expectations from the beginning is important (Manager, PAF 9, 2014).
Granting only to eligible organizations	Ensuring grants are only made to organizations endorsed by the ATO as DGR (Item 1)	7 (5)	Tool	. . . the accountability comes from the fact that to get the DGR 1 status you have to jump through so many hoops and it has to be signed off by government . . . that to me is a significant level of accountability that everyone has to adhere to (Manager, PAF 1, 2014)
Experienced and professional staff	Employment of staff by the PAF, or contracting services	7 (3)	Process	. . . the hope is that we won’t find ourselves in that situation [failure of a grant] now that there’s professional staff (Manager, PAF 10, 2014)
Formal funding and grant-approval processes	Written criteria detailing what a PAF wishes to fund, and any restrictions on eligibility	6 (5)	Tool	They’re very strict about making sure that things fit the criteria (Trustee, PAF 4, 2014)
Relationships and engagement	Connections and ongoing involvement between PAFs and other actors	5 (5)	Process	I have an organization that we give considerable funds to and I meet with them every two months. I talk to them about their strategic plan, I give them feedback, I talk about how they present themselves, and I try and introduce them to other funders (Manager, PAF 8, 2014).

Note. PAF = Private Ancillary Funds; DGR = deductible gift recipient; ATO = Australian Taxation Office; $ = AU$.

Accountable Why?

Examining the reasons why PAFs were aware of, interested in, and engaged in accountability, analysis revealed two main categories: motivations and purposes. The themes under motivations included why PAFs want to be accountable with regard to values and emotions, reflecting the underlying motivation for the creation of the PAF. Accountability represented an intention to demonstrate results, lead and inspire others, characterize a family, and enjoy the success of a partnership.

Themes under the category of purposes included what being accountable achieved for the PAF, or the goals and outcomes sought by the fund through being accountable. The main focus of the responses was around avoidance of scandals, efficiency and effectiveness in operations, and ongoing achievement of the PAF’s mission.

Frumkin (2002) frames these distinctions around whether the nonprofit sector’s actions are valued for their instrumental character in creating outcomes that benefit society, or for their expressive character that benefits “those who undertake them” (Frumkin, 2002, p. 20). Frumkin’s expressive reasons sit at the individual level, whereas PAFs as organizations were accountable for the expressive dimension of their actions to founders and family in particular. The findings show both instrumental and expressive reasons were important and interrelated for PAFs in regard to their accountability, but were sometimes constrained by their privacy.

The internal motivations and purposes for PAFs engaging in accountability indicate a general acceptance (evident in nine of the 10 interviews) that greater accountability is both beneficial and unavoidable. Table 4 summarizes the themes relevant to this research question.

Table 4.

Reasons for Accountability in PAFs.

Accountable why?	Definition	Number of references (sources/10)	Example quote from PAF manager or trustee
Motivations	Wanting to be accountable, feelings, beliefs, and values	16 (8)	. . . the satisfaction of starting something and seeing it grow and be successful (Trustee/Founder, PAF 3, 2014).
Purposes	The use of accountability for the achievement of outcomes and goals	16 (6)	. . . trying to encourage everything to happen efficiently and transparently and with accountability . . . and doing what you can to limit the harm that the rotten apples will cause (Trustee, PAF 7, 2014).

Note. PAF = Private Ancillary Funds.

Discussion

The findings from this study reveal the similarities and differences between Ebrahim’s (2010) conceptual framework of accountability, developed for nonprofit organizations in general, and accountability specific to PAFs, as endowed grantmaking organizations for which accountability exists on a deeper level than simple compliance. Four variations to the framework are proposed based on areas of poorer fit, such that the framework is refined in the context of this particular subset of nonprofit organizations.

The first expansion proposed to Ebrahim’s (2010) framework is the addition of a fourth question: accountability why? There is a surprising lack of consideration of this question in the accountability literature (Karsten, 2015; Koop, 2014). One possible reason is that for many nonprofit organizations, accountability is about survival and financial sustainability. They must be accountable to secure approval and funding, from those on whom they depend for resources: the public, philanthropic sources, or government (Froelich, 1999; Van Slyke, 2006). However, for PAFs and other nonprofit organizations with an endowment, accountability beyond regulatory compliance is not linked with financial sustainability as their existence is guaranteed in perpetuity, barring unexpected financial disaster or a deliberate choice to close the fund. Questioning why such organizations are accountable therefore becomes particularly revealing.

The second expansion is the addition of circular accountability to the three directional categories identified by Ebrahim (2010) (being upward, downward, and horizontal), to capture the finding of accountability to peers within a tightly defined group. PAFs have a distinct identity, and felt a sense of responsibility to each other and to the philanthropic sector of which they are a prominent and rapidly growing part. There was a particular concern for potential scandals and critical media resulting from a lack of accountability damaging the reputation of PAFs, as negative consequences impact all members both individually and collectively. This circular or within-group accountability demonstrates the importance to larger and more mature PAFs in particular of offering leadership through best practice to other PAFs and foundations, while allowing newly established PAFs to learn and practice accountability in a “protected” environment of supportive peers (Gavison, 1983). Although only briefly discussed in the literature (Tran, 2008; Turnbull, 2007), this networked form of accountability is an important finding in this study. PAF managers and trustees, however, noted the focus on privacy for many individual PAFs has unintentionally impeded sharing learnings, challenges, and successes with other PAFs.

Gugerty and Prakash’s work (Gugerty, 2009; Prakash & Gugerty, 2010) on voluntary accountability within groups, self-regulation, and club theory has relevance to PAFs. However, there are key differences between their work in a nonprofit context and findings in a philanthropic context. In particular, Gugerty (2009) considers group accountability in the public sphere, where membership of voluntary groups, associations, or clubs, often identified with a seal or logo, signifies certain standards. However, for PAFs, their circular accountability is not through public identification.

The third variation proposed to Ebrahim’s (2010) conceptual framework is the modification of accountability for “finances” to accountability for “resources,” acknowledging PAFs offer more to their beneficiaries than just money. Additional elements to funder–nonprofit relationships include the exchange of knowledge, learnings from experience, specific expertise, endorsement and advocacy, convening, and a broad oversight of the third sector. Although the significance of these relationships is acknowledged by Ebrahim on the basis of funding, the existing category (finances) is insufficient to encompass the importance of PAFs’ multimodal support.

The fourth variation to Ebrahim’s (2010) framework is a more flexible understanding of the mechanisms of accountability, categorized by Ebrahim as tools (used at a point in time) and processes (used over time). The findings suggest that mechanisms used as a tool by one actor are at other times used as a process by another actor(s). This changing of categorization by actors and by time periods offers a more nuanced understanding of how accountability mechanisms are used by different nonprofit organizations for different purposes and at different stages in an accountability relationship.

Interpretive Associations of Findings

Table 5 provides a collective overview of the associations between the perceived accountability relationships, activities, forms, and motivations of PAFs, presenting an interpretive framework as a basis for future research.

Table 5.

Interpretive Associations of Findings Relating to the Four Research Questions.

Accountable to whom?	Accountable for what?	Accountable how?	Accountable why?
Other PAFs, other trusts and foundations	Grantmaking, investments	Openness to inquiry and discussion, sharing expertise and best practice	Lead and inspire others, avoidance of scandals
Philanthropic sector as a whole	Demonstrating best practice in grantmaking and investing, integrity, and professionalism	Disclosure, transparency, openness to inquiry and discussion, experienced and professional staff, risk management	Show results, lead and inspire others, avoidance of scandals
ACNC	Financial status, grants made, compliance, governance	Reporting in the form of an AIS	Regulatory requirement, possibility of sanctions, vehicle to make information publicly available
ATO	Governance, investments, reporting	Adherence to Treasury guidelines, restriction on granting to DGR1 endorsed organizations	Regulatory requirement, possibility of sanctions, avoidance of scandals
Beneficiary organizations	Considered grantmaking, having an efficient application process, clear and reasonable reporting requirements	Obtaining reports from beneficiaries, engagement, undertaking site visits, discussion and questioning, answerability, grant agreements	Shared aim of working for ultimate beneficiaries, shared or overlapping mission(s), enjoy success of partnership
Ultimate beneficiaries	Building capacity and financial sustainability of beneficiaries, effective grantmaking	Due diligence on possible beneficiaries, DGR1 restriction, long-term partnerships with beneficiaries	Obligation to give back, increased impact
General public	Selective disclosure, considered grantmaking, conserving resources, mission-focus	Openness to inquiry and discussion, transparency, due diligence on applicants, compliance with regulation through the ACNC and the ATO	Understanding societal needs and current efforts to address them, sense of felt obligation to give back

Note. PAF = Private Ancillary Funds; ACNC = Australian Charities and Not-for-Profits Commission; AIS = Annual Information Statement; ATO = Australian Taxation Office; DGR = deductible gift recipient.

The associations shown in Table 5 suggest the research questions are strongly interrelated and therefore need to be studied holistically, rather than as separate subjects. The associations are presented in summary form, therefore not all are detailed (e.g., some aspects of “accountability how” relate to more than one stakeholder group but in different ways). This emphasizes the complexities inherent in these connections between the research questions.

The interpretations highlight the fragmentary nature of accountability in PAFs, differentiated by the actors or agencies to whom an account is given (Ebrahim, 2010; Mashaw, 2006). To PAFs, the most valuable audience was their peers, raising the importance of this group in driving change in deep-seated, values-based accountability. Attention might be focused on the future work of representative bodies in providing connectedness and learning spaces for PAFs. This would be a strong driver of progress for the interrelated components of accountability, where public accountability remains discretionary.

Conclusion

The systematic examination of the perceptions and practice of accountability of PAFs benefits Australian charitable organizations by enhancing the understanding of this relatively new giving structure, expected to have a large beneficial impact on the nonprofit sector in future. As expressed by Wilson (2015), “For charities looking to tap into this revenue stream [grants from PAFs], it is important they understand the structures, how they are used and the motivations for establishing them” (p. 29). Hence, this article contributes a novel and valuable “insiders” perspective on PAF accountability. Key findings include the following:

PAFs recognize that they are accountable primarily to their beneficiaries; regulatory bodies (the ACNC and the ATO); the general public; the philanthropic sector as a whole and other PAFs in particular; and the children of the founder.

PAFs perceive that they are accountable for their grantmaking decisions, investments, and financial management; as well as accountable for the internal management of the fund, assessing performance, managing risk, and conserving resources.

PAFs identify that they are accountable by way of reporting and performance measurement of beneficiaries and projects funded, selective disclosure and transparency, undertaking site visits and engaging with beneficiaries, undertaking due diligence on applicants and applications, and through openness to inquiry and discussion.

PAFs understand that being accountable enables them to demonstrate results, lead and inspire others, represent a family, and enjoy the success of partnerships. Accountability also brings shared learnings, strategic focus, reduced risk, and greater visibility.

PAFs are subject to pressures to comply with a wider societal trend toward accountability, audit, and measurement of value (Leat, 2004; Liket, 2014). Against this backdrop, the philanthropic sector globally has witnessed a steady increase in the number of foundations participating in transparency and accountability activities, and the number of “watchdog” organizations monitoring their work (Phillips, 2013). As awareness of these trends filters through the Australian philanthropic sector, there is a slowly building momentum for PAFs and other foundation types to “take part” or engage in similar measurement and accountability practices (Leat, Williamson, & Scaife, 2014).

The implications for the broader nonprofit sector of this increasing acceptance by PAFs of greater accountability will likely be a gradual rise in the volume and quality of information disclosed. It may also lead to a trend toward more partnerships between PAFs and their beneficiary organizations (McLeod, 2014a) as such information leads to clearer and closer alignment of values and missions over time. There is significant potential for voluntary membership-based bodies (such as Philanthropy Australia) to offer leadership and learning spaces and provide a powerful nudge toward accountability.

The mutual influence of PAFs on their accountability is a key finding from the study. This circular or within-group accountability will likely increase in significance over time as the number and the size of PAFs grows. Research on proto-institutional theory (Lawrence, Hardy, & Phillips, 2002) suggests nascent institutions form through isomorphism and imitation, where organizations copy and learn from each other. These normative forces over time reduce differences between actors, bringing them together and creating new, context-specific institutions.

The group identity of PAFs has been enhanced through public submissions to two government inquiries affecting PAFs (in 2009 and 2012), the clearly defined and identifiable structure that PAFs share, and the higher profile slowly being adopted by some individual PAFs (Wilson, 2015). The rise of giving circles and other giving collectives in Australia is increasingly promoting philanthropy as a shared activity, with decisions made in semipublic groups rather than private forums such as boards of trustees. Hence, developments in the wider philanthropic sector, as well as the PAF subsector, will likely influence the evolution of PAF accountability.

The majority of the PAF managers and trustees interviewed did not see public accountability via transparency as a necessary component of their overall accountability. Several reasons for this lack of disclosure to the general public were discussed, in particular privacy and concern about being overwhelmed with funding applications. Interviewees felt they were able to achieve an acceptable level of accountability through targeted engagement with key stakeholders, such as beneficiary organizations, regulatory bodies, and other philanthropic entities. Although accountability to the general public as a stakeholder group was important to PAFs, this was perceived as being achieved through grant application processes, criteria for grants (e.g., requirement for a broad community benefit), the presence of an external responsible person on the board of trustees, and compliance with the regulatory requirements of the ACNC and the ATO, as representatives of the Australian public (McLeod, 2014a).

The link between accountability and transparency is strong in the U.S. philanthropic sector (Buteau, Glickman, Leiwant, & Loh, 2016; Dufton, 2014; Rourke, 2014), and also in the academic literature (Liket, 2014; Mashaw, 2006; Tyler, 2013). However, the findings from this study suggest the connection between accountability and transparency in the form of public disclosure is less strong for foundations in an Australian context. The smaller size of the philanthropic sector in Australia (Coyte et al., 2013), the strong egalitarian ethos that persists in Australian society (Liffman, 2008; McDonald & Scaife, 2011), the desire for privacy, and the voluntary nature of disclosure combine to create a different context for Australian philanthropic accountability compared with other countries.

Limitations

One of the key constraints to conducting studies on PAFs is the restricted, intermittent, and sometimes outdated data available regarding their contact details, location, size, founders, and areas of interest (Cham, 2014; Coyte et al., 2013). The research strategy therefore focused on richness of content, rather than on larger sample numbers (such as might be achieved through a survey) which give information on more organizations but with less insight. Although data were limited to a sample of 10 PAFs, valuable insights into the accountability of this notoriously private and difficult to access but increasingly important philanthropic group were nevertheless obtained.

Another limitation was that the interviewees were all white Australians. It is possible that PAFs as a structure are not attracting donors from diverse ethnic or cultural groups; however, this cannot be inferred from the small sample size. Cultural diversity in PAFs may be an issue in future, as their grantmaking will to some extent reflect the founders’ culture, values, and identity. In a U.S. context, Sharp (2012) proposes actively encouraging individuals and families from a broad range of cultural and ethnic backgrounds to establish philanthropic foundations, with the expressed aim of increasing diversity in grantmaking.

Future Research

A natural extension of this research would be to explore accountability in other philanthropic giving structures, such as Public Ancillary Funds¹² (PubAFs). Like PAFs, PubAFs have a public benefit purpose, but also have a requirement to raise funds from the public. Both PAFs and PubAFs are growing in number (McGregor-Lowndes & Crittall, 2015), and the accountability of PubAFs will potentially be more complex, due to their wider stakeholder groups.

Another area for research is longitudinal studies of PAF accountability. Although a PAF may initially be considered as an extension of its founder(s), over the life of the organization, it will be governed by a changing board of trustees potentially including the founder’s children, and may also be managed first by family and then by professional staff. As the group of individuals involved in the PAF grows and changes, the perceptions of its accountability will also likely evolve. Similarly, the extent of that evolution is an issue to be explored, as disclosure of some elements of organizational identity, such as size and area of giving, may be possible without compromising individual level privacy.

Furthermore, with the ACNC confirmed as an ongoing regulator for the sector, it is now able to move forward with its agenda of ongoing work around sector-level reporting and transparency. The philanthropic sector should therefore anticipate pressure for increased accountability, through regulation and/or peer pressure. Nonprofit self-regulation (Bies, 2010; Murtaza, 2012) suggests that accountability mechanisms be managed by nonprofit coordinating bodies, and this offers a possible direction for future research given the strength of findings around perceived accountability to other PAFs and to the philanthropic sector.

Successful engagement with accountability for a PAF results in greater impact and satisfaction for those involved in the fund. The importance of accountability therefore lies in its ability to spur change and improvement. As noted by Lloyd (2008, p. 276),

Once an organisation starts to engage with the issue and questions of accountability to whom and for what are asked, a process of self-reflection can evolve that goes to the heart of why an organisation exists, what it seeks to achieve, and whom it ultimately aims to serve.

Footnotes

Appendix

Development of Coding Categories.

Theory and data-driven codes	Definition and notes
Accountable to whom	To whom (person, group, agency or statement) is the PAF accountable or responsible in some way
• Board of trustees	Boards as groups, individual board members or trustees of PAF, including the designated Responsible Person
• Family	Families, children, grandchildren, parents, grandparents, and wider family groups
• Founders	Founder(s) of the PAF, their life story or personality, (sometimes the interviewee themselves)
• PAFs as a group	PAFs as group or structure type, and the influence or impact they have on philanthropy and the nonprofit sector
• To whom not accountable	to whom the PAF does not consider itself accountable
Accountable for what	For what activities, actions or decisions is the PAF accountable
• Investments and investing	Investments and investment policies and procedures of the PAF
• Cofunding with other foundations	PAF cofunding an organization/project with another philanthropic trust/foundation
Accountable how	Through what methods, processes, or procedures is the PAF accountable
• Performance measurement and reporting	Numeric or narrative reporting by beneficiaries to PAFs, often to pre-agreed standards
• Disclosure, transparency	Making information freely and publicly available
• Relationships and engagement	Including site visits and attending events
• Due diligence on possible beneficiaries	Investigation of applicant organizations
• Openness to inquiry and discussion	Questioning and responding to questions
• Formal funding and grant-approval processes	Written and public criteria about a PAF’s funding, including grant agreements
Accountable why	For what reasons is the PAF accountable, what are the motivations or inducements for accountability
• Purpose and mission of PAF	Reasons for the PAFs existence, and its mission as expressed through its grantmaking/investments
• Peer influence	Effect of peers on the PAF, and the influence of the PAF on peers (perhaps child code of leadership here?)
• Source of funds	Origin of the funds now in the PAF
• Taxation, tax deductions	Tax deductions for gifts into the PAF, and the concept of foregone tax revenue
Emergent codes	Definition and notes
Privacy of PAF	Privacy of the PAF, including policies and attitudes to privacy, changes in privacy levels, reasons for privacy, and difference between private and public
Timeframes and futures	Time, timeframes, changes in the PAF over time, and the future of the PAF
Power and control	Issues of power and/or control that arise (internally or externally)

Note. PAF = Private Ancillary Funds.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

Author Biographies

Alexandra Williamson’s PhD involves an examination of the accountability of philanthropic foundations that both raise funds and make grants. She has over 15 years’ experience working in the philanthropic sector, first with one of Australia’s largest private foundations, and then within the charitable trusts team of a national trustee company.

Belinda Luke is an associate professor in QUT School of Accountancy. Her research interests include accounting and accountability in third sector organizations. Prior to joining the tertiary sector, she worked as a tax manager for PricewaterhouseCoopers in Australia, Ukraine, Papua New Guinea, and China.

Diana Leat is the author of over 100 articles and books on the nonprofit sector, specializing in philanthropic foundations. In 2010, she was scholar-in-residence at the Rockefeller Archive Centre, New York, and until its closure in 2013 was a trustee of the Diana, Princess of Wales Memorial Fund. Her recent books include The Inventive Foundation, a study of foundations creating new ventures, and Philanthropic foundations, Public Good and Public Policy.

Craig Furneaux is a lecturer at the Australian Centre for Philanthropy and Nonprofit Studies, at Queensland University of Technology in Australia. He has over 20 years’ experience working for and researching with nonprofit organizations, with a particular long-term focus on building management capabilities. His research in the Centre focuses broadly in the areas of accountability, capability, collaboration, and various forms of capital in the social economy.

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