Britain’s Philanthropic Empire

Charities Aid Foundation plays lead role in globalization of giving

Philanthropy, like politics, remains for many people primarily a local phenomenon. But as the interconnectedness of many social issues becomes increasingly apparent, and as images of disasters, civil strife, and environmental destruction are transmitted worldwide nearly instantaneously, more donors are looking to make an impact beyond the borders of their own communities and nations.

Among the handful of philanthropic institutions seeking to be a leader in global giving is the Charities Aid Foundation, which was set up nearly 80 years ago to promote philanthropy in Britain and now hopes to do the same in large regions of the world.

Tax laws in many countries still discourage many donors from making gifts across national borders. But in an era when private capital moves freely around the world and technology has made intercontinental communication routine, charitable resources must have the same flexibility, asserts Michael Brophy, the organization’s longtime chief executive.

“The globalization of markets means the globalization of philanthropy,” he says. And CAF, which now operates on four continents, is trying to improve the channels through which nonprofit funds can flow — thereby making it easier for American companies to support economic development in India, for example, or for Russian charities to do research on grant makers in Western Europe.

Charities Aid, which manages assets of $1.4-billion, has played a key role in adapting the U.S. model of community foundations to countries like Britain and Russia, for instance, as well as in promoting on-the-job giving in Australia and India. It bills its CharityCard — a debit card that can be used here in Britain for making gifts online, by phone, or in other ways — as the first of its kind anywhere. And the financial services it offers charities have expanded to include investment funds and even a bank.

The organization is “a sort of venture-capital bank for civil society,” says John Richardson, who directs the European Foundation Center, in Brussels.

Creative Leadership

Nonprofit leaders attribute much of CAF’s innovative spirit and global outlook to Mr. Brophy, a former Royal Navy bomber pilot and advertising executive who has been at the helm for nearly two decades.

“Michael is one of the most creative, high-energy social entrepreneurs that this field has seen on either side of the Atlantic,” says William S. White, chairman of the Charles Stewart Mott Foundation, which underwrote much of the effort to establish community foundations in Britain. The country now has about 50 such foundations, which solicit funds to support nonprofit programs in specific geographic regions. “That one program alone is going to change the whole philanthropic landscape in the U.K.,” Mr. White says. “It’s a tremendous accomplishment.”

The organization’s strategy is two-pronged: to help donors, particularly large corporations, make gifts both at home and abroad with maximal tax benefits and minimal administrative burden, while also helping to strengthen charities and promote giving in parts of the world where nonprofit activities are still relatively fragile and underdeveloped.

In trying to serve the needs of charities and individual and institutional donors alike, Charities Aid combines elements of a national community foundation, a United Way, a charity bank, a financial-services company, a management and fund-raising consulting center for nonprofit groups, and a think tank.

Mr. Brophy, who has also been credited with being the intellectual progenitor behind Fidelity Investments’ $2.5-billion Charitable Gift Fund, attributes CAF’s protean nature to his own low threshold for boredom, and to a pragmatic desire to seek greater efficiency by integrating several functions in a single organization.

“In a small country with a different background, we have a tendency to do more things under one umbrella than is typical in the U.S.,” he observes.

Continued Growth Expected

The eclectic approach seems to have worked. In 1982, when Mr. Brophy joined Charities Aid, it had about £12-million under management and distributed about £10-million a year to charity. Today, by contrast, the organization, which has 350 employees, distributes some £150-million ($210-million) to charity. Hundreds of charities have deposited funds with CafCash, the group’s banking subsidiary, where they can invest in several common investment funds and receive more favorable interest rates than they would get at commercial institutions.

With a new tax law now in place in Britain that offers incentives for charitable giving, a looming intergenerational transfer of wealth, and growing interest in nonprofit activities, the organization is poised for even more rapid growth around the world, Mr. Brophy says, adding, “There’s no reason why it shouldn’t be 10 times as big in 10 years as it is now.”

Unlike an endowed foundation, however, Charities Aid can distribute in grants and other forms of support only whatever resources it raises from others. Most of the grants it awarded last year were parceled out following the advice of donors who channel their gifts through the foundation.

“Whether a corporation or a little old lady with a CharityCard, lots of other people are calling the shots,” observes Mr. White.

Transition Time

The Charities Aid Foundation must therefore find financial backers for almost any venture it hopes to begin. It has linked up with the European Union and the British government to make grants in Europe, as well as managing the giving of corporations, foundations, and individuals.

Its global ambitions are reflected in its decisions during the past decade to open regional offices in Russia (established in 1993), the United States (also 1993), Bulgaria (1995), Belgium (1996), South Africa (1997), India (1998), Ghana (1999), and Australia (2000), with plans under way to operate in East Africa and possibly also in China and the Middle East. As companies extend their operations around the world, the charity believes, their giving will necessarily follow — and CAF hopes to position itself as a useful partner in that process.

The next few years will be an important time of change for the Charities Aid Foundation. A tax law that took effect last year in Britain promises to unleash a spate of new charitable giving here that may necessitate an expansion of the domestic financial and other services it provides. And Mr. Brophy himself has entered his final year in office before retiring next spring.

“This is a very good time for CAF to be reviewing where it’s going, because it’s completed its core mission of creating the most favorable environment for giving in Britain,” says Richard Fries, who headed Britain’s Charity Commission from 1992 to 1999 and is now a visiting fellow at the Center for Civil Society at the London School of Economics and Political Science. “The question for CAF now is what is its role to be?”

Barry Gaberman, the Ford Foundation’s senior vice president, notes that Mr. Brophy, who he says “has consistently seen new things and had the courage to go after them,” may not be easy to replace. “It’s a conundrum for the institution if it wants to continue that sort of work,” he says, “because people like Michael are hard to find.”

In Britain, CAF is poised to open a charity bank, which, unlike CafCash, will accept deposits on which it pays little or no interest and then will lend the money to charities or nonprofit groups under terms much more favorable than those they could obtain from commercial lenders. Many people who might not be prepared to make large gifts to charities, Mr. Brophy says, might be willing to lend large sums for a period of time — thereby creating another stream of nonprofit support.

International Role

But for all its domestic expansion, the role of Charities Aid is likely to be increasingly international as well. CAF already boasts among its clients such prominent British and American companies as America Online, American Express, Barclays Bank, BP Amoco, Citigroup, and Johnson & Johnson, which increasingly are using it to handle their on-the-job charity campaigns and employee matching-gift programs in countries where they operate.

CAF’s overseas offices vary considerably in the functions they perform. The South Africa office, for example, played a leading role in creating the Non-Profit Partnership, which promotes nonprofit activities in that country by seeking new laws and financial services that benefit philanthropy. CAF West Africa seeks to help local nonprofit groups become more financially stable in part by promoting mergers and strategic alliances, and by encouraging collaboration with government. CAF India, meanwhile, is soliciting support from Indians living outside the country, as well as from Indian companies. Among its projects is one providing equipment and teacher training to improve primary education in the northern state of Uttar Pradesh, one of the country’s poorest. And since the destructive earthquake in January in the western coastal state of Gujarat, CAF has worked with local and national aid groups to cope with that disaster.

CAF Russia, by contrast, began life as a resource center for Russia’s fledgling nonprofit groups and gradually added more services for donors as well — many of them free. Since its creation in 1993, it has helped start a dozen community foundations across the country. It now employs 30 people and has a $5-million budget. Of the $4.1-million in grants it distributes annually, about half comes from Russian donors — primarily businesses and the government. It also publishes a periodical called Money and Charity and maintains a library of nonprofit materials.

When Western grant makers began operating in Russia after the 1991 breakup of the Soviet Union, few of them focused on methodically developing the capacity of nonprofit groups to work effectively, says Shannon Lawder, the Mott Foundation’s regional director for central and eastern Europe and Russia. CAF Russia took on that role, she says, and the result has been “phenomenally successful.”

Slow Start in United States

Yet some of the tensions inherent in an organization that tries to serve both grant seekers and grant makers are evident in the recent decision by CAF Russia to split itself in two. CAF Russia will now focus on making grants, working closely with Russian and international foundations, companies, and individual donors. A new organization — Russian CAF (which stands for Consultations for Associations and Foundations) — is helping Russian charities with fund raising, negotiating with donors, tax incentives, and other issues.

One of CAF’s disappointments, Mr. Brophy acknowledges, has been its efforts to recruit American donors to make use of its services.

When the organization set up a U.S. affiliate in 1993, Mr. Brophy recalls, “I thought it was going to go through the roof from Day One.” Yet the idea of offering companies, foundations, and individual donors an easy way to channel money to groups overseas with all the tax benefits of giving to a U.S. charity at first attracted few takers, and CAF America was forced to scale back its initial ambitions. It stopped losing money only last year, when it channeled more than $12-million in gifts overseas.

Mr. Brophy attributes the slow takeoff to poor marketing on CAF’s part, while also citing “a parochial view of international operations in the U.S. nonprofit sector,” in which many donors seem content to support international work through organizations like Save the Children or CARE International rather than through donor-advised funds, which afford donors the chance to support a much wider range of organizations.

Mr. White, of the Mott Foundation, has a slightly different perspective. “CAF has done better when it’s gone into places like Russia or other parts of the world where there isn’t any philanthropic infrastructure,” he says. “In the United States, we didn’t need that.”

New Technology

Charities Aid has been quick to adopt new technology that can help both donors and charities. In conjunction with the Levi Strauss Foundation, it has set up Europe’s first online grants-management system. Since the system’s debut in October, the Levi Strauss Foundation has awarded $250,000 of its $600,000 in gifts to nongovernmental groups that applied online, says Zoltan Valcsicsak, community-affairs manager for Levi Strauss in Africa, Europe, and the Middle East.

Levi Strauss supports projects in Belgium, Britain, Germany, Italy, the Netherlands, Spain, and Sweden through a $950,000 donor-advised fund that it set up at CAF last year. Mr. Valcsicsak says the online system “has great potential for long-term benefits for grant makers and N.G.O.’s,” and predicts that it might eventually lead to the creation of “virtual communities” of grantees who swap information.

In Britain itself, CAF clients can use the Internet to apply for grants, make and monitor grants, post and receive information, and even do online banking through their CafCash accounts, says Sarah Hughes, who heads the charity’s new-media department. And the online use of the CharityCard, which first appeared in 1998, now totals about £10,000 ($14,000) a week.

For all the new high-tech ventures and geographic expansion, however, CAF continues to focus on increasing the resources available for nonprofit activities. And Mr. Brophy, for his part, expects to pursue that goal even after retiring from CAF next year. He’s interested in the possibility of helping to create a truly pan-European grant-making commercial institution, perhaps modeled along the lines of Fidelity’s Charitable Gift Fund, which has grown rapidly to become one of the largest charities in the United States.

A similar investment fund could be established in Europe, Mr. Brophy suggests, without requiring a Europe-wide charitable law, which may be a long time in coming. A grants committee composed of representatives from all corners of the continent could then make decisions about program spending, with donations receiving the appropriate tax benefits at the point of distribution.

“The distribution would be new resources, not just an aggregate of existing resources,” Mr. Brophy says. “I think it’s possible in 10 years to create the biggest investment vehicle in Europe.”

CHARITIES AID FOUNDATION

History: In 1924, Britain’s National Council of Social Service set up a Charity Department to encourage more efficient charitable giving. In 1974, the council — by then renamed the National Council for Voluntary Organizations — granted the department independence as the Charities Aid Foundation and established it as a registered charity with an independent board of trustees.

Purpose: To increase the resources of nonprofit organizations by promoting more effective charitable giving in the United Kingdom and elsewhere.

Program activities: Runs employee payroll-deduction and matching-gift programs; issues a debit card used for making charitable gifts; handles donor-advised funds and charitable trusts and bequests; manages charities’ bank deposits and investments; and conducts research and publishes information on voluntary organizations.

Finances: Last year had revenues of £181-million ($253-million) and made about £150-million ($211-million) in grants on behalf of individual, foundation, and corporate donors. It also manages more than £1-billion ($1.4-billion) in bank deposits and financial investments for charities.

Key officials: Sir Peter Baldwin, president; Sir Brian Jenkins, chairman; Michael Brophy, chief executive.

Address: The main office is in Britain at Kings Hill, West Malling, Kent ME 19 4TA; 44-1732-520-000. The U.S. office is at 1800 Diagonal Road, Suite 150, Alexandria, Va. 22314-2840; (703) 549-8931.

Web sites: http://www.cafonline.org and http://www.allaboutgiving.org

WHERE CHARITIES AID FOUNDATION HAS OFFICES

AUSTRALIA
P.O. Box 1830, Chatswood NSW 2057, Australia
61-2-9413-9977 or 61-2-9413-4488
61-2-9413-4066 (fax)
E-mail: cafaustralia@caf.charitynet.org

BELGIUM
Rue Dejonckerstraat 46, B-1060
Brussels, Belgium
32-2-544-00-50
32-2-544-08-80 (fax)
E-mail: cafbrussels@caf.charitynet.org

BULGARIA
4-A, Vesletz Str., 4th Floor
Sofia 1000, Bulgaria
359-2-987-1574
or 359-2-981-1901 (telephone and fax) or 359-2-894-082
E-mail: cafbulgaria@caf.charitynet.org

GHANA
F-146/5 Second Soula Street
North Labone Estates
P.O. Box OS-2956, OSU
Accra, Ghana
233-21-771-953 (telephone and fax)
E-mail: cafwestafrica@caf.charitynet.org

INDIA
25 Navjeevan Vihar, Ground Floor
New Delhi, India 110 017
91-11-652-2206
91-11-656-1468 (fax)
E-mail: cafindia@caf.charitynet.org

14 Cookson Road
Richards Town
Bangalore, India 560084
91-80-547-4394 (telephone and fax)
E-mail: cafblr@bgl.vsnl.net.in

RUSSIA
14/6 Ulitsa Sadovnicheskaya 57
Moscow 113035, Russia
7-095-792-5929 (telephone and fax)
E-mail: cafrussia@caf.charitynet.org

SOUTH AFRICA
14 de Korte Street
Braamfontein 2017
Gauteng, South Africa
27-11-339-1136
27-11-339-1152 (fax)
E-mail: cafsouthernafrica@caf.charitynet.org

UNITED KINGDOM
Main Office
Kings Hill, West Malling
Kent ME 19 4TA
44-0-1732-520000
44-0-1732-520001 (fax)
E-mail: enquiries@caf.charitynet.org
114/118 Southampton Row
Holborn, London WC1B 5AA
44-0-20-7400-2300
E-mail: enquiries@caf.charitynet.org

UNITED STATES
King Street Station
1800 Diagonal Road, Suite 150
Alexandria, Va. 22314-2840
703-549-8931
703-549-8934 (fax)
E-mail: cafamerica@caf.charitynet.org