In 2014, private foundations with assets of less than $50 million made charitable distributions well in excess of the minimum required 5%, averaging 7.6%, while foundations with less than $1 million averaged distributions of 13.2%, according to the fourth Annual Report on Private Foundations by Foundation Source.
These amounts challenge the notion that private foundations hew closely to their 5% minimum distribution requirement (MDR) each year.
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According to Foundation Source CEO Robert Chartener: "A common refrain among the general public, and even among philanthropy professionals, is that private foundations only meet the 5% minimum distribution requirement (MDR) each year. However, we have collected data on the activities of private foundations with assets below $50 million for several years, and this community, which represents 98% of all U.S. private foundations, has consistently and significantly exceeded their MDR."
The Annual Report from Foundation Source is noteworthy in that foundation research typically focuses on the "mega foundations," those that make up just the largest 1-2% of all foundations.
Extrapolating data from these outliers to the entire population can lead to misunderstandings about the foundation sector as a whole.
The report is based on the transactions of 769 Foundation Source clients. The data is based on actual transactions recorded as Foundation Source processed grants, paid expenses, and reported investment information on behalf of its foundation clients.
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By GlobalDataBecause this report is based on empirical data, not opinion surveys, estimates, or tax returns, the information is both accurate and timely.
Top findings from the report include:
1. Foundations gave well above the 5% MDR
The distribution rates for 2014 were generally consistent with the previous year. Overall, the foundations distributed 7.6% of their assets, 50% above the required 5% MDR, and nearly identical to their 2013 distribution rate of 7.5%. Moreover, foundations with less than $1 million in assets distributed 13.2% in 2014, the largest percentage relative to their asset size. That these smaller foundations matched, and even slightly exceeded, their 2013 distribution rates was noteworthy in light of the moderate growth of their assets in 2014.
2. Foundations saw modest asset growth in 2014
These foundations experienced an overall average asset growth of 3.7%. This was in marked contrast to 2013, when foundation assets grew 20.7% on average. Although foundations with assets of $10-$50 million saw growth of 4.6% in their asset values in 2014, the smallest foundations, those under $1 million, experienced a 2% decline. There were various factors besides market returns that contributed to the growth or decline of their asset balances.
3. Overall giving in 2014 was up 18.3% from 2013
Collectively, these foundations gave more in 2014 than in the previous year. However, foundations with assets between $10 and $50M increased their grantmaking the most, rising 28.0% over 2013.
Foundation Source chief philanthropic officer Page Snow said: "We are pleased to see that foundation distribution rates have remained consistently strong, year after year. As policies are currently being proposed that would mandate distribution levels for other charitable vehicles, such as donor-advised funds, there’s been speculation about the possible impact of such requirements.
"We believe that private foundations may prove useful bellwethers in that the minimum distribution rate seems to be perceived by foundation donors as a floor, rather than a ceiling. The results of our report are therefore potentially instructive for policy makers considering the imposition of distribution requirements for other charitable vehicles."
