Private foundations with less than $50 million in assets saw big increases in 2012 in their endowments, in their giving, in contributions from donors, and in returns on investments, and they paid out in grants and overhead more than twice the level required by the IRS, a new report says.
Aggregate assets held by 732 clients of Foundation Source grew 10 percent to $2.1 billion at the end of 2012, compared with a year earlier, while giving by those foundations grew to $215.7 million in 2012, up 9.2 percent from $197.5 million a year earlier, says the 2013 Annual Report on Private Foundations from Foundation Source.
Donors added $1.06 for every dollar the foundations spent on grants and charitable expenses, up from 93 cents a year earlier.
Investment returns totaled 9.3 percent up from a loss of 1.5 percent in 2011, and a loss of 4.3 percent from 2008 to 2011.
While the IRS requires that private foundations make charitable distributions, including grants and charitable expenses, equal to 5 percent of their assets, charitable distributions by private foundations in the study totaled 11.7 percent of the average value of their assets, up from 11.2 percent in 2011.
Because the distribution requirement is based on a share of each foundation’s endowment, Foundation Source says, as assets grow, the distribution must grow proportionately to keep pace.
“The fact that the distribution percentage increased over 2012 means that the relative rise in charitable disbursements not only kept pace with the endowment growth, but actually exceeded it over the same period,” Foundation Source says.
Andrew Schulz, national director of community and legal relations at Foundation Source, says the findings in the report indicate that private foundations with less than $50 million in assets, representing 98 percent of the roughy 86,000 private foundations in the U.S., have begun to stabilize along with the economy overall.
Foundations of that size “were not ‘catching their breath’ in 2013,” Schulz says in a statement. “Private foundations that had stood strong in difficult economic times continued to step up,” he says, “suggesting that regardless of what lies ahead in 2013, foundations with assets under $50 million will continue to respond robustly and provide vital support for the nonprofit communities they serve.”
— Todd Cohen