[A reader named Neal, responding to my March 23, 2009, Inside Philanthropy blog about foundation hoarding, offered a thoughtful and provocative comment in the Stanford Social Innovation Review, which also publishes the blog. The comment follows. – Todd Cohen]
I work for a large foundation and agree with many of your points but also want to acknowledge that it can be complicated.
Our endowment must last into perpetuity and other foundations are not allowed to dip below corpus.
That means all of us have to manage spending to meet the obligations we have to the founders; meet our obligations to non-profits; and create a cushion so we can weather market downturns.
We, for example, make on average about 10 percent on our investments each year.
We spend 5 percent to meet federal tax regulations.
Inflation averages 3 percent so we really only make on average 2 percent a year.
That percent annual growth allows us to build up a cushion so we can maintain spending in down years.
We obviously make a lot more during the up years and lose a lot more during the down years but on average it works out to be fairly reasonable.
I do agree, though, that foundations can and should do more when the opportunity is there.
I also agree that nonprofits need to kick the habit.
The rate of return on grants can be appalling because the time invested in writing the grant can be disproportionate to the size of the grant.
I know this sounds crazy, but nonprofits could band together and refuse to take foundation money until the rules changed.
Foundations would get desperate to find places to spend their required 5 percent and would potentially come to the table to talk about real systemic change.
Nothing will change, though, as long as nonprofits are willing to spend four days applying for a $1,000 foundation grant.
It is clear that foundations need to be pushed to change and that we could and should do more.
We have no outside influencers to force us to change so please keep pushing.
Someone has to.