|
Private foundations can be grouped into two major categories: those that pursue an essentially “hands-off” style of charitable giving, and those that seek to add value in the grantmaking process. The former focus their efforts on fiduciary due diligence; they leave to the grantee full responsibility for implementation, outcomes assessment, and communication of results. These foundations should, and typically do, have low administrative costs, and most of their expenditures are in the form of extramural grants.
The best value-added foundations, in contrast, are run essentially as nonprofit businesses. They require professional staff and strong leadership by recognized leaders in their fields. They devote resources to developing programs internally and to research that makes their grantmaking more effective. Their programs have specific goals, and their staff are evaluated for productivity and the quality of their work. A premium is placed on communications, outcomes assessment, and accountability. Value-added foundations sometimes manage certain programs directly, rather than delegate the role to a grantee — when, for example, the appropriate expertise is not available externally, or when a high degree of management control is essential to a project's success. As cases in point, The Commonwealth Fund conducts its International Program in Health Policy and Practice, including Harkness Fellowships in Health Care Policy, and the Task Force on the Future of Health Insurance internally. Not surprisingly, it costs more to manage a foundation of this type than it does to run a foundation that essentially writes checks to grantees.
One argument put forward during the recent debate was that the administrative expenses of many foundations are excessive, and that higher payouts should be required of such institutions. Spending on administration was branded in some commentary as "spending on themselves," and Congress was encouraged to disallow administrative expenses in the calculation of the annual payout requirement. Some advocated a very broad definition of administrative expenditures: any expenditures that are not extramural grants, possibly even including those arising from the direct conduct of research, communications, and other intramural activities. Such policies would have affected value-added foundations primarily.
The universe of 62,000 foundations in the United States is extraordinarily diverse, and the great majority of institutions are small: in 2001, 93 percent of foundations had assets of less than $10 million, and only .4 percent (214) had assets of $250 million or more. Simply because of their size, few foundations with assets below $250 million are equipped to pursue a value-added foundation strategy, and many large foundations also eschew this approach. Thus, value-added foundations constitute a small group whose combined assets in 2001 were probably not more than $200 billion, with a current annual payout of approximately $10 billion. Most have perpetuity as one of their institutional goals, consistent with the long-term nature of the problems they seek to address and the intent of their donors to make a sustained difference in perpetuity.
|
