Foundation giving down 8.4% in 2009, Foundation Center reports

 “Challenged by a prolonged economic downturn, the nation's grant-making foundations cut their giving by an estimated 8.4 percent in 2009, a new report from the Foundation Center finds. The decline is the steepest since the center began tracking the data in 1975.”

According to the Foundation Growth and Giving Estimates report released by the Foundation Center on April 16, 2010, foundation giving was down approximately 8.4% in 2009. This represents a record decline since the Center began tracking information in 1975, yet it is a significantly lower decrease than one would expect, given the estimated 17% loss in foundation assets in 2009.

Facilitators at CCSR often hear from people who want to start nonprofits that they will “get grants” to fund their operations. While grants certainly can be a part of an organization’s revenue, CCSR often reminds enthusiastic founders that grants should only make up about 20% of their nonprofit’s revenue. The rest should come from members’ support and donations, corporate giving, events and fundraisers, and revenue generated from activities that support the organization’s charitable purpose.

It is also helpful to understand how grant-making organizations work. So here are two pieces of information that will help you understand a little bit more about foundation giving. Let’s call it “Intro to Foundation Funding.”

1. Foundations follow a formula to figure out how much they have available to give. The formula can vary by foundation and is the responsibility of the organization’s board to determine. The formula is usually a percent of an average of a foundation’s revenue over a three- to five-year span. For example, the funds available for grant-making in 2010 could be [x] percent of the average of a fund’s average market value for 2007, 2008, and 2009, which will vary based on earnings in that time. A foundation might have several funds. The [x] is usually a small enough number to ensure that the fund will endure perpetually, such as 5%.This is called asset-averaging. What does that mean? Gains or losses in the value of a foundation’s funds are mitigated by the averaging process. But the 17% loss in assets from 2009 will lower the amount of money foundations are able to give for two to four more years.

2. Most foundations cannot give grants from a fund if the value of that fund has dropped below its historic gift value. Say Betty the Community Supporter gave $100,000 to her Local Community Foundation in 1997. Over time, through wise investing, the Local Community Foundation was able to grow the amount in that fund. But in 2009, the value of this fund dropped to $90,000. Most foundations have rules in place that prevent them from using that $90,000 to give grants. They must wait till the value of the fund returns to $100,000. This will affect the Local Community Foundation’s ability to make grants in 2010.

The Foundation Center reports that several factors lessened the decrease in giving: many grantmakers cut their operating expenses, a few key big grantmakers committed to giving more, and community supporters like Betty continued giving to foundations. This is good. But nonprofits should be aware that foundations may have fewer dollars available in 2010 and over the next couple of years. Communities should be aware that their arts promotion, social service, and youth-supporting nonprofits—among others—may be struggling to secure grants for even 20% of their budget, which may impact their ability to provide services.

With that in mind, individual donors should think about giving a little more to their favorite charitable organization this year, if they can.


Authors:  Amy Delamaide, Sarah Jolley, and Seth Bate

 Photo courtesy of Chet Thomas