Foundations with a living donor often face an uncertain future. Whether these organizations determine to keep grantmaking or to spend down, grant management software can be a smart solution to staying organized. Time is a very important consideration for foundations, whether their giving is perpetual or limited to a finite period. An effective grant management platform can ensure that organizations give more strategically and efficiently, no matter what the long-term plans are.
Spend down or perpetuate
Lifespan planning is important for foundations. An increasing number of publications are addressing this issue and are helping these organizations work through their options. Foundations take different approaches to this quandary. According to a report from the FoundationCenter, 12 percent of family foundations embrace a limited lifespan, while one-quarter of these organizations are undecided about their future. Interestingly, the report also found that for foundations giving in perpetuity, this decision was frequently made at the organization’s inception. When the decision to spend down was made when the foundation is established, the reason was typical that the donor wanted to have a greater impact during his or her lifetime as to how the money would be distributed.
For many, the decision of whether or not to expand the lifespan of a foundation is directly related to its mission. Those interested in perpetual giving tend to believe that a philanthropic institution can have more of an impact over the long term, Grant Craft noted. However, because many expect to continue operations far into the future, they often need to utilize funds for the purpose of keeping doors open. This means that foundations traditionally deliver about 5 percent of their funds. On the other hand, foundations that expect to spend down may be more flexible with the assets available to them.
The website cited the example of the Bill and Melinda Gates Foundation, which is delivering funds over a finite period. Rather than staying within the traditional 5 percent range, the foundation accelerated spending to make an impact on polio, and the results have been significant. In 25 years, the number of new polio cases has been reduced from 350,000 each year to less than 400 in 2013.
When foundations are created, they have many decisions to make, but they all share the goal of delivering assets to enact positive change. Grant management software can optimize the giving potential of these organizations and provide flexibility for potential growth or spend down in the future.