Researchers Track US Foundation Distributions
1 November 2012 at 9:41 am
US philanthropic research organisation, The Foundation Center, has released new research that examines the payout practices and spending patterns of more than 1,000 larger U.S. independent foundations.
Understanding and Benchmarking Foundation Payout explains the concept of payout, which refers to the total amount that a foundation reports as its charitable distribution. (The law requires the vast majority of private U.S. grantmaking foundations to distribute at least 5 percent of their net investment assets for charitable purposes each year.)
The report is described as the first of its kind to track payout practices of the largest U.S. foundations. It finds that during the period 2007-2009, the largest share of endowed foundations (46 percent) reported payout rates in the range of 5 to 5.9 percent, on average.
Nearly one-in-five foundations had payout rates at or above 10%.
"While the very top grantmakers tend to pay out close to the 5% minimum, there is surprising variation in payout levels of larger foundations overall, and annual rates are affected by drastic changes in the stock market," Loren Renz, the author of the report and vice president emeritus for research at the Foundation Center said.
"Only by averaging these rates across multiple years can a balanced view of payout practices be realised."
The amount a foundation spends on staff, overhead, and other program-related administrative expenses is included in the calculation of its qualifying distributions each year. Benchmarking Foundation Administrative Expenses: Update on How Operating Characteristics Affect Spending considers how differences in foundations’ infrastructure, operations, and programmatic activities influence their spending patterns.
The report finds that whether a foundation employs paid staff is the single most important factor affecting its expense levels, followed by staff size. In addition, foundations that regularly engage in international grantmaking, foundation-administered programs, or making grants directly to individuals have expenses-to-qualifying distribution ratios that are roughly twice as high as those that do not.
The research was made possible through support from the Charles Stewart Mott Foundation.