Study: Smallest foundations the most generous
Smaller foundations increased giving 21 percent last year, according to a new study, even as Connecticut nonprofits scrambled for a slight cost-of-living increase from the state.
The study was published by Foundation Source, a Fairfield organization that provides back-office management and grant-making services to more than 1,000 foundations nationally. For this year”™s study, Foundation Source studied grants made by more than 700 foundations with assets under $50 million, which represent 98 percent of the foundations in the country today. The vast majority of those have endowments between $250,000 and $5 million.
The numbers furnish a sneak peak at Foundation Source”™s Private Foundation Index, scheduled to be unveiled later this year. The complete report will provide information on not just the grant-making activity of small to mid-size private foundations, but also the investment performance of their endowments.
In general, those foundations gave more than twice their 5 percent minimum distribution requirement, with the smallest foundations giving away significantly more ”“ countering what Foundation Source says is a widespread notion that private foundations limit their giving to the 5 percent minimum distribution requirement dictated by the federal tax code.
“Small to mid-size private foundations are the silent majority in the philanthropic sector,” said H. King McGlaughon, CEO of Foundation Source, in a statement. “While all eyes tend to be on the Gates and Ford Foundations of the world, we believe there is another, more dynamic story to be told about the tens of thousands of foundations under $50 million in philanthropic assets. By shining the spotlight on this important slice of the philanthropic pie, we”™re able to better understand the complex factors that foster and inhibit charitable behavior in the United States.”
Private foundations with less than $10 million in assets increased giving by 21 percent over their activity in 2010; foundations with assets between $10 million and $50 million, however, scaled back their giving by 8 percent.
As giving priorities shifted in 2011, foundations increased grants 41 percent in arts and culture. Education, by contrast saw a 3 percent decrease in funding, while funding to science and technology initiatives was cut by more than half.
Connecticut nonprofits have been reeling from the double whammy of lower contributions coupled with increased demand for many organizations”™ services, particularly those that provide social assistance. In his budget for fiscal 2013 that begins this June, Gov. Dannel P. Malloy included a slight increase to the cost-of-living adjustment on state contributions to nonprofits, which otherwise have received no COLA payments since 2008.
Nonprofits have coped by cutting jobs and reducing employee benefits.
“Providers have had to employ mechanisms that negatively impact Connecticut”™s economy in order to continue serving clients effectively,” said Ron Cretaro, executive director of the Connecticut Association of Nonprofits. “Cuts to the safety net and deferring much needed COLAs not only result in fewer jobs, but also increases to what staff must pay for their health insurance.”