Foundations should do more

Organized philanthropy in the U.S. is booming, a growth spurt that should spur foundations to pay out a bigger share of their assets in the form of grants, provide more operating support and become more active shareholders.

Thanks to a healthy stock market, an increase in the number of new foundations and in “pass-through” foundations by younger donors, and the formation of operating foundations by pharmaceutical firms, giving by the 71,000 grantmaking foundations in the U.S. grew to $40.7 billion in 2006, up 11.7 percent, according to a new report by the Foundation Center.

Foundation assets grew 7.8 percent in 2005 to a record-high $550.6 billion, according to the Foundation Center, which says the U.S. is experiencing a “golden age of philanthropy.”

But foundations are not sharing as much of their wealth or spending or investing it as effectively as they could.

Foundations continue to fight proposals for an increase, from 5 percent currently, in the share of their assets they are required to payout in grants and overhead.

And as a recent report from the National Committee for Responsive Philanthropy concludes, foundations are falling woefully short in the level of the critical operating support they provide to nonprofits.

And far too few foundations have been willing to use their assets to try to use their investments to try to bring the policies of companies in which they invest more in line with their philanthropic mission.

While foundations may indeed be enjoying a golden age, too many of them are hoarding their gold when they should be using more of it to support and strengthen the effectiveness of nonprofits.