| For Immediate Release 9/3/2003 |
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| "REMOVING FOUNDATION OVERHEAD COSTS FROM FOUNDATION ‘PAYOUT' WOULD HELP CHARITIES, PRESERVE FOUNDATIONS, AND ENCOURAGE PHILANTHROPIC EFFICIENCY," SAYS NCRP | |||
| ‘Passing Section 105 of the Charitable Giving Act of 2003 Will Close a Loophole That Deprives America's Nonprofits of Desperately Needed Grants,' Notes Philanthropy Watchdog in Commenting on H.R. 7 | |||
| WASHINGTON - The National Committee for Responsive Philanthropy (NCRP) issued the third in its recent series of reports on foundation "payout" rates and the legislation in front of the House Ways and Means Committee which would increase foundation grantmaking by excluding private foundations' administrative and operating expenses from the required minimum 5 percent charitable spending requirements. NCRP Executive Director Rick Cohen called on nonprofits and foundations alike to speak out in favor of the bill, saying "This legislation has the potential to increase foundation grantmaking to the nation's finally strapped nonprofit organizations by billions of dollars, plus it will enhance foundation accountability and simplify foundation compliance with federal requirements." As a nonprofit watchdog group working to improve philanthropic effectiveness with an eye toward social justice, NCRP congratulated the bipartisan sponsors of Section 105 of the Charitable Giving Act for recognizing the importance of foundation grantmaking to the vitality and productivity of the nation's nonprofit delivery system. "Our report makes it clear once again that foundations have nothing to fear from excluding their administrative and operating expenses from their federally mandated charitable payout," NCRP's Cohen said. "Even including the past few years of turbulence in the stock markets, private foundations have earned on average a return on their investments in a mix of equities and bonds that would allow for a payout in grants that is greater than 5 percent of their endowments. Furthermore, many foundations receive even additional income on top of investment returns in the form of additional contributions from donors and income from rental fees and real estate." NCRP's new report, Closing the Loophole: Removing Foundation Overhead Costs from Payout, reviews the most recent research to conclude that foundations could and should pay out at least 5 percent of their endowments annually in grants. "Foundation grantmaking is crucial to the support of public policy advocacy, social change, and nonprofit organizing groups," Cohen said, "and there could hardly be a time more than now where the advocacy voices of nonprofits are needed to call for social change and social justice in our society." Among the major findings in Closing the Loophole: · Foundation overhead expenses are likely to be as much as $3.2 billion in 2003, which would translate into 26,000 average-sized grants to nonprofits if those funds were granted out to nonprofits under Section 105 of H.R.7. · Many foundations have turned the 5 percent payout "floor" into a "ceiling", which when including administrative and operating costs, frequently amounts to considerably less than 5 percent in grants. · Returns on investments, even with the past couple of years of turbulent stock markets, are still sufficient to keep foundation endowments growing, even ahead of inflation, even if they increased their payout from 5 percent to 5.4 percent or more. An investment portfolio that was 70 percent equities and 30 percent bonds would have earned an inflation-adjusted return of nearly 8 percent from January 1980 through December 2002. NCRP's earlier reports demonstrate that many private foundations receive new infusions of money beyond portfolio investment returns, including new contributions from donors and income from real estate holdings, further undergirding their ability to meet or exceed a payout rate of 5 percent in grants. |
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