Money in, money out

You”™ve heard of the gift that keeps on giving? As one local entity sees it, foundations of late have been the givers that keep on getting.
Wealthy donors contribute as much new capital to their private foundations each year as those entities in turn grant to nonprofits, according to a study released by Fairfield-based Foundation Source, a provider of backend support for private foundations.
The data was released as a preview of a larger report set for later this summer to include data on grants, asset allocation and investment performance. Locally, the Connecticut Council for Philanthropy is holding its annual summit May 23 in Plantsville.
Since 2007, private foundation donors contributed fresh capital to their foundations at the rate of 104 percent of the amounts granted, a surprising revelation given the assumption in some quarters that foundations are launched with sizable endowments that reinvest earnings from investments and ongoing fundraising from other sources.
“Half the foundations in the country were formed in the last 15 years and their founders are people who are still in their earnings years,” said Andy Bangser, CFO of Foundation Source. “The foundation is something they are funding every year out of their earnings. We see a lot of that.
“People start foundations, and when they start them they tend to be smaller,” Bangser said. “They put money in over time, so the smaller foundations are more likely to be growing faster with new capital ”¦ When you get into the second and third generation, then ”¦ the founder put money in years ago and now they”™re primarily living off their endowment.”
Foundation Source looked at the three key variables that affect private foundation asset levels: “money out” in the form of grants and expenses; infusions of new capital, contributed by the donor; and gains or losses in the financial markets.
While much other reporting about philanthropy is based on surveys and estimates, Foundation Source compiled its research based on real-time transactional data only.
At the end of 2011, total assets of private foundations with endowments of less than $50 million were, on average, 91.3 percent of their value four years previous heading into the recession year of 2008.
That group makes up 98 percent of the approximately 80,000 private foundations in the United States. Foundation Source said its data provides a rare snapshot of the fiscal performance of the majority of private foundations in the United States during the worst economic crisis since the Great Depression.
Despite growth in 2009 and 2010, 2011 saw a 3 percent average decrease in foundation asset levels. New capital contributions in 2011 were up 19 percent from the prior year, but still funded only 84 percent of total money out (grants plus expenses). That rate of replenishment was higher than 2010 (72 percent), but lower than 2008 and 2009 (94 percent and 111 percent).