Given that the percentage of income the average American gives to charity has remained unchanged for the last fifty years, were foundations to implement the recommendation you’ve suggested, it would certainly seem to have the effect of moving money to the most well-vetted of charities…

…but it would not create new dollars.

This may still be a great good–eliminate the charities that foundations consider the dead wood.

But what if, instead of foundation officers trying to convince major donors to give more (to the charities foundations believe should receive more), what if foundations themselves went beyond the five percent they are required to give…not just for one emergency year but as a regular practice?

What would happen, in other words, if a foundation upped that to 10% annually?

Might it be that foundations can lead the way not only because of their extensive due diligence but because of the example of their increased generosity?

I would argue that major donors need the latter even more than the former.

And who’s to say that a foundation giving away 10% of its income wouldn’t draw a Warren Buffet-type gift from a major donor seeking to make twice the immediate impact of a gift to any other foundation?

We have the solid due diligence necessary to do international grassroots grantmaking, and a committed staff with extensive Africa experience.

We have an impressive network of 200 grassroots partner organizations in ten African countries, all doing tangible and important things for children’s well-being.

We have a strong network among much larger organizations (for example, USAID/PEPFAR, UNICEF, the Global Fund to fight AIDS, Tuberculosis and Malaria, and the larger US and European foundations). We are actively encouraging those organizations to get more resources closer to community-based organizations and thus closer to children.

What we DON’T have, at least in sufficient capacity, is capital to grant. This last year we’ve had to limit cap our grants at an average of $9000, when many of our partner organizations could put twice that amount to good use.

We feel a particular sense of urgency this year, because of course the same financial situation which is hitting the philanthropic sector is also being felt, acutely, at the grassroots level in Africa – already weak government services being stretched or discontinued, more stress on community safety nets, and more households left without resources.

It is certainly a time for putting together partnerships that stretch resources and build on complementary strengths. We’d love to hear from those who would like to do so.

Peter Laugharn
Executive Director, Firelight Foundation
http://www.linkedin.com/in/laugharn

Thanks for raising this issue. Many of us have been talking about our concerns for possible giving declines in 2010, but little has yet been written about the subject so this is quite timely.

For me, your post reinforces the necessity for everyone in our philanthropic community to create an expectation that private foundations do more than is legally required of them.

There was a moment when the recession’s effects first began to be felt when foundations were debating what to do. A few put a halt to grantmaking entirely, realizing that legally they didn’t actually have to make any grants this year to meet their payout requirement. But then nonprofits became more vocal about the threat to their operations in a time of increasing demand and decreasing revenue. A few courageous grantmakers started making public there commitment to maintain grants payout for 2009 at 2008 or 2007 levels. And they did this even though it means their payout rate for 2009 may be 7% or 9% of assets or higher. And this responsible approach became the most socially acceptable response in foundation circles.

We need to start now working to ensure that it becomes unpalatable for foundations to consider cutting back their grants payout in 2010, even if it would be legally permissible. Nonprofits will still be struggling financially well into next year, and they’ll need grantmakers to step up to the plate.

The moral obligations of private foundations go far beyond the legal requirements. Leaders of many private foundations realize this and will act responsibly. We need to highlight their stories and challenge other grantmakers to follow their lead.

Anyone have examples of foundations who have publicly committed to maintaining 2010 grants payout at 2008 rates?

The first, “Impact Philanthropy,” focuses on a single issue and recommends highly effective nonprofits making an impact on that issue in our region. Our first issue area was crisis assistance, and we recommended six anchor institutions in the region that met specific criteria including that they have a mission to serve low-income individuals and families; professional, visionary board and staff; strong financial stewardship and locations throughout our 23-county region. In addition, we recommended 29 nonprofit organizations focused on crisis assistance who have previously been assessed through our extensive competitive grants process. This first “Impact Philanthropy” resulted in 96 grants from donor-advised funds, totaling more than $1 million to 29 organizations. In addition, a $100,000 donor-advised fund grant to one nonprofit was matched 1:1 resulting in $200,000 for the organization. Our next “Impact Philanthropy” will be focused on current challenges to Atlanta’s arts community and which arts organizations are doing effective work.

Our second donor engagement series, “Give Well,” highlights various giving approaches when considering a gift to a nonprofit. These giving approaches include general operating support, nonprofit effectiveness, public will and advocacy, research and analysis and project support. We focused first on general operating support, which is also where all of our competitive grantmaking is focused and has been since spring 2009, and we encouraged donors to look at key aspects of nonprofit management when considering a general operating support grant. Our next issue of “Give Well” will be focused on nonprofit effectiveness – offering resources for organizational and professional development opportunities through management consulting grants, scholarships for workshops, classes and/or coaching.

Through these donor engagement series, not only are we able to provide extensive knowledge about issues in our region and giving options when investing in nonprofits, but we’re also recommending specific nonprofits for donors to consider based on our competitive grants (regranting, as you mentioned).

The final count – in 2008 our payout across donor-advised funds was 28%.

Thanks for 1) your answer to the question and 2) putting it out to your readers. I appreciate everyone’s input and will be compiling the ideas (with attribution) along with a review of the year past and the year to come for publication in Q4 2009. I’ll keep in touch here with Sean and your comments, and you can also ping me directly on twitter at @p2173, email [lucy@blueprintrd.com] or on http://www.philanthropy2173.com.

I’ll get all online comments and ideas into one online place in advance of publication and also. And we can keep the conversation going.

Thanks, Sean and everyone, and keep the insights coming!

Lucy