Comments on: Wrongheaded Thinking about Foundation Grantmaking http://www.nonprofitquarterly.org/cohenreport/2008/12/02/wrongheaded-thinking-about-foundation-grantmaking/ The Cohen Report is on the intersection of nonprofits, politics, and public policy. It is written by NPQ's National Correspondent, Rick Cohen, and published by the Nonprofit Quarterly. Thu, 15 Jul 2010 17:44:45 +0000 hourly 1 http://wordpress.org/?v=3.1.2 By: Steven Lawrence http://www.nonprofitquarterly.org/cohenreport/2008/12/02/wrongheaded-thinking-about-foundation-grantmaking/comment-page-1/#comment-561 Steven Lawrence Wed, 10 Dec 2008 19:37:23 +0000 http://www.nonprofitquarterly.org/cohenreport/?p=193#comment-561 We at the Foundation Center agree that there are more nuanced distinctions to be made among the various types of foundations and that any meaningful analysis of foundation payout would need to take such factors into account. It is interesting to note, however, that the IRS only recognizes two distinct types of private foundations - private operating” and “private non-operating” foundations. Because of this, we have since the 1980s taken it upon ourselves to subdivide the non-operating funders into “corporate” (i.e., company-sponsored) and “independent” foundations, and to include even more nuanced distinctions in our research. For example, our analysis of foundations’ operating expenses—conducted in partnership with the Urban Institute and Guidestar—examined the impact of characteristics such as type, size, staffing, geographic focus of giving, and whether the foundation was endowed or served as a pass-through for giving (http://foundationcenter.org/gainknowledge/research/pdf/fec_report.pdf). We also agree that the actual payout rates can vary tremendously based on whether a foundation chooses to maintain an endowment or operate on a pass-through basis, and if it maintains an endowment, whether it plans to exist in perpetuity or spend down its assets. Whether a foundation has a living donor may also be a salient characteristic in determining payout. Ultimately, the debate over payout rates shades into the perennial question asked by those who think about foundations: Would society be better served by focusing the bulk of foundation resources on current challenges and letting future philanthropy take care of what will come down the road, or does philanthropy owe something to the next generation(s)? While there’s no right answer, recent research suggests that questions about payout should be considered in relation to a particular foundation’s mission and strategy. And in many ways the strength of foundation philanthropy is that those 72,000+ grantmaking foundations will have differing perspectives on this question, ensuring that philanthropic resources are available to meet both current and future challenges. We at the Foundation Center agree that there are more nuanced distinctions to be made among the various types of foundations and that any meaningful analysis of foundation payout would need to take such factors into account.
It is interesting to note, however, that the IRS only recognizes two distinct types of private foundations – private operating” and “private non-operating” foundations. Because of this, we have since the 1980s taken it upon ourselves to subdivide the non-operating funders into “corporate” (i.e., company-sponsored) and “independent” foundations, and to include even more nuanced distinctions in our research. For example, our analysis of foundations’ operating expenses—conducted in partnership with the Urban Institute and Guidestar—examined the impact of characteristics such as type, size, staffing, geographic focus of giving, and whether the foundation was endowed or served as a pass-through for giving (http://foundationcenter.org/gainknowledge/research/pdf/fec_report.pdf).

We also agree that the actual payout rates can vary tremendously based on whether a foundation chooses to maintain an endowment or operate on a pass-through basis, and if it maintains an endowment, whether it plans to exist in perpetuity or spend down its assets. Whether a foundation has a living donor may also be a salient characteristic in determining payout.

Ultimately, the debate over payout rates shades into the perennial question asked by those who think about foundations: Would society be better served by focusing the bulk of foundation resources on current challenges and letting future philanthropy take care of what will come down the road, or does philanthropy owe something to the next generation(s)? While there’s no right answer, recent research suggests that questions about payout should be considered in relation to a particular foundation’s mission and strategy. And in many ways the strength of foundation philanthropy is that those 72,000+ grantmaking foundations will have differing perspectives on this question, ensuring that philanthropic resources are available to meet both current and future challenges.

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