January 23, 2008
Did You Know?
Foundations are Increasing Direct Charitable Activities
Historically, foundations have been known for their grant making programs. However, many foundations engage in what the 1969 Tax Reform Act defines as “direct charitable activities,” or non-grantmaking initiatives. More Than Grantmaking: A First Look at Foundations’ Direct Charitable Activities is a report by the Foundation Center that examines foundations’ involvement in direct charitable activities, the impact of these programs on administrative expenses, and changes in the use of this practice in recent years. The report finds that 25% of independent and family foundations, 16% of corporate foundations and 61% of community foundations conduct direct charitable programs and activities.
Of the 25% of independent and family foundations that engaged in direct charitable activities, approximately 60% increased their level of activities in the past five years and 35% remained at the same level of activity.
Reasons foundations engage in these activities include:
- To build capacity among grantees
- To improve effectiveness of the philanthropic field
- To promote collaborations among grantmakers with related interests
- To advance knowledge about the field or practice area
- To encourage grantees to share their expertise and knowledge
- To inform public policy or promote dialogue on policy issues
The study also finds that spending by independent and family foundations for direct charitable activities range from a small fraction of their charitable administrative expense to more than 25% for about one in four. Charitable expenses are all expenditures related to carrying out a foundation’s charitable mission, including expenses for grants administration, direct charitable activities and general overhead costs. A foundation with a higher percentage of charitable administrative expenses might indicate that operating programs may be substituting for grantmaking now and more prevalently in the future.
Source: The Foundation Center, More Than Grantmaking: A First look at Foundations Direct Charitable Activities, 2007.
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