This year has been incredibly difficult. One of the most contentious and turbulent presidential elections and transitions in American History. COVID-19 and the consequential social and economic impacts. National protests responding to racism and police brutality. Wildfires ravaging parts of the west coast. These are just a few of the urgent challenges facing the country and the world at this moment...
Whatever your foundation's mission, it has been and will continue to be influenced by these and many other challenges. Private foundation board members, investment committees and senior staff are charged with the fiduciary responsibility to make informed decisions when guiding the investment and spending activities of their organization. In philanthropy, we always talk about stewarding endowment resources so that we have adequate money for a “rainy day”. Well, in 2020, it seems every day has been a rainy one.
Earlier in the year, the Council on Foundations (COF) launched their Call to Action: Philanthropy’s Commitment During COVID-19; with over 790 foundations signing a pledge that outlined a number of ways to meet the moment, including increasing spending. With foundation leaders such as the Ford Foundation taking bold steps towards increasing their ability to spend more, other foundations of all sizes were asking: what can we do to meet the moment? how do we spend more to meet the moment? What should we be considering? What are the implications?
Over the last few months, Commonfund has worked with the Council on Foundations and the National Center for Family Philanthropy on the creation of a new strategy guide for foundations, Balancing Purpose, Payout and Permanence. The Guide is designed to provide practical and actionable options for approaching financial stewardship and strategic decision making regarding increased spending in turbulent and uncertain times. Building on that effort, Commonfund and the Council on Foundations recently released the 2019 Council on Foundations-Commonfund Study of Foundations (CCSF). The Study specifically examines the issue of increased giving by demonstrating the impact on endowment value, spending and intergenerational equity through five sample modeling scenarios.
Recently, the Center of Effective Philanthropy (CEP), surveyed 800 foundations and received 236 responses. The report asked a series of questions about how foundations responded to the COF pledge and in what ways. The survey also asked if, and by how much, foundations were increasing their grant-making budgets. Among groups that had reached a decision in this area, 72 percent said they “had or will increase grant making in 2020 beyond what was previously budgeted for the year.” Of those, 41 percent said they would increase their grant making budgets by 10 percent or less, 18 percent said they would increase it by 11 to 20 percent, and 12 percent said they would nearly double their grant making budgets, increasing grant making by 91 to 100 percent.[1]
The considerations below are not an exhaustive list. They are meant to include, expand, and enhance the tools, resources, learnings and conversations (and grapple with the fundamental tension) that are already occurring regarding managing the endowment for the long term and spending more to meet the moment.
Foundation Spending Strategy - Things to Consider
- Mission—and imagination
- Operating budget
- Staffing capacity
- Current/Future cash needs - Liquidity
- Existing commitments and total investment returns
- Spending policy
- Perpetuity horizon
- Governing documents
- All assets on deck
- Carry forward on excess distributions
- Asset allocation
- Diversification
- Donations/Contributions
- Socio-economic conditions
