|
A "dashboard" view of how the Fund is measuring up on each of the four perspectives (finances, customers, internal business processes, and organizational learning and growth capacities) is presented in Figures 2 through 5.
Financial Metrics
The Fund has been successful in maintaining the purchasing power of its endowment: in constant 1980 dollars, the fiscal year average value of the endowment rose from $135 million in 1980 to $275 million in 2006, thus restoring a significant portion of the purchasing power lost in the 1970s period of stagflation. This was achieved by realizing strong returns on the Fund's endowment and by spending at a rate to ensure sustained endowment purchasing power. The investment return objective is to outperform the weighted market benchmark over extended periods and to avoid substantial underperformance in one- to three-year periods. For the one-, three-, five-, seven-, and 10-year periods ending June 30, 2006, the endowment outperformed its market benchmark, and almost did so for the 25-year period.
Figure 2. Selected Commonwealth Fund Scorecard Metrics: Financial
  
To ensure the foundation's perpetuity, spending as a percentage of the average value of the endowment should not exceed 5.5 percent over any five-year period. (14) With a substantial budget reduction in the 2003-04 fiscal year (in response to the 2000-03 bear stock market) and essentially flat budgets since, and with unexpectedly strong returns in the 2004 and 2005 calendar years, the Fund's five-year average spending rate is now below the target. To avoid any problems in meeting the long-term IRS spending requirement, the Fund accordingly increased its budget by 5.6 percent in 2006-07, and, given a favorable market environment, plans further increases for coming years. The Fund helps secure the necessary resources for pursuing ambitious program goals by leveraging its resources. The foundation is exceeding its goal of having at least 25 percent of grant appropriations matched with cofunding by other organizations. In addition to seeking funding partners, the foundation aims to develop working partnerships with a wide variety of organizations (currently more than 175) able to augment its capacities and help disseminate the results of its work.
As a value-added foundation, the Fund must devote considerable resources intramurally to research, program development, and communications—representing, as with any other information-generating business, production costs that are central to achieving a strong product line and being able to market it effectively. At the same time, ensuring effective balance between extramural grants and intramural research, program development, and communications is a key ingredient to long-term financial stability and to pursuing strategic objectives effectively. In 2003, the Board of Directors established a guideline that at least 60 percent of the Fund's spending should be in extramural grants—a useful marker for resource allocation decisions. Even in a tight overall budgetary environment, it has been possible to adhere to the ceilings on the intramural spending share of 32 percent and administrative spending share of 8 percent.
|
