Twenty-first century philanthropy
December 2009
Charitable foundations should be better utilised to encourage social investment
A 5 per cent minimum percentage payout for foundations should be introduced to encourage more effective philanthropic giving in the UK, suggests a new report from the Centre for Charity Effectiveness at Cass Business School [1].
A distribution quota for private foundations currently exists in both the US and Canada – in the US foundations must circulate at least 5 per cent of their funds to beneficiaries each year, and in Canada the level is 3.5 per cent. If a 5 per cent pay-out ‘rule’ is adopted in the UK the charitable funding of endowed foundations could increase by 31.5 per cent, equating to around £1bn per year [2].
The top 500 foundations spend at least £2.7bn a year on charitable enterprise and the report makes three other major recommendations to the government on how to fully harness this ‘untapped resource’:
- More work must be carried out to make significant social investment a reality.
- A wider variety of umbrella charities with donor advised funds should be set up with government seed funding.
- Every avenue for additional resources must be explored in the current economic climate when the incomes of charitable and voluntary organisations are under pressure – especially as those foundations whose funds come from an endowment will also find their resources under strain.
In recessionary times, the payout from foundations is especially important – Bruce Gordon, chairman of the Honorary Treasurers Forum [3] advised greater visibility for their advantages. ‘Within the sector, foundationsshould report on the added value of their grant giving and ensure that their governance and grant making procedures are appropriately managed, both in the context of public benefit and interest,’ he said. ‘They must also urgently review their current commitments and policies to ensure their funding models are impact based and take into account the life cycle of the recipients of their funds.’
[1] Peter Grant & Lindsay Driscoll, Philanthropy in the 21st Century, Cass Business School is downloadable from www.cass.city.ac.uk/media/stories/resources/21st_Century_Philanthropy_Final_Version1.pdf
Author: Claire Shropshall
Claire Shropshall is the editorial assistant for Charity Funding Report, Caritas, and Codicil magazines. Claire has a BA in English Literature and Philosophy from Birmingham University and a Postgraduate Certificate in Periodical Journalism from London College of Communication. She previously worked in Central America as a voluntary reporter for an English-language newspaper.
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