Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

June 8, 2009

Foundations should step up in downturn

By Todd Cohen

The recession is putting a world of hurt on nonprofits, and foundations can be doing a lot more to help ease that pain.

Responding to big losses in the value of their endowments, foundations have looked for ways to reduce their spending.

That has ranged from cutting staff and freezing pay to trimming benefits and curbing training and travel.

But foundations also have been slashing the funds they pay out in grants, and that is deeply troubling.

Private foundations are required each year to pay out only five percent of their assets, and can count overhead as part of that payout.

According to a recent report by The Foundation Center, the combined U.S. foundations’ endowment fell nearly as much last year as the total grants those foundations paid out over the past four years.

Hoarding, in short, cost the charitable world four years’ worth of grant dollars that now is lost forever.

Economic crisis is a time when foundations should be giving more and giving smarter. For example:

* Grantmakers for Effective Organizations, in a new report, calls on grantmakers to hold their grants budget steady, engage their stakeholders to get a better idea of their needs, and provide flexible funding for operations and free of restrictions.

* Hodding Carter III, former president of the John S. and James L. Knight Foundation, in a guest column in The News & Observer in Raleigh, N.C., calls on foundations to provide more unrestricted support, longer-term funding and multi-year grants “so nonprofits have the flexibility they need to respond to changing conditions.”

* John Hunting, founder of the Beldon Fund, commenting on its successful completion of plans to spend its entire corpus of $120 million that was dedicated to supporting environmental policy work, says that, given the state of the environment, “I felt it would be inexcusable not to spend out now.”

Despite the loss in the value of their endowments, foundations should be digging deeper and acting more strategically during critical times to help nonprofits address urgent social and global problems.

Cutting back on giving when it is needed most betrays the purpose for which foundations were created in the first place.


  • At 7:16 AM, Anonymous Scott Rooks said…


    Very interesting and thought provoking post.

    You are correct that nonprofits are getting beat up in the recession but what about the effects on the foundations?

    Foundations have suffered through some pretty dramatic changes on the down side in their investment portfolio and the markets are pretty much still unstable even for the conservative investor. So if they, the foundations, increase giving where does that leave them in terms of future grant making if the markets continue to take hits from the recession and new regulations over the next few years? Should they not think in terms of preservation of capital?

    Thanks for bring this subject up and getting it out in the open for discussion.


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