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May 21, 2015 at 09:32 AM
Small and midsize private foundations made distributions averaging 7.6% in 2014, well in excess of the 5% U.S. private foundations are required to distribute, Foundation Source reported Thursday.
Foundation Source’s fourth Annual Report on Private Foundations analyzed the investment and grant making behavior of private foundations with assets of less than $50 million.
The report said foundations with less than $1 million averaged distributions of 13.2% last year.
These amounts belie the notion that private foundations stick closely to their 5% minimum distribution requirement each year, Foundation Source said in a statement.
“A common refrain among the general public, and even among philanthropy professionals, is that private foundations only meet the 5% minimum distribution requirement each year,” Foundation Source’s chief executive Robert Chartener said in a statement.
“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 report’s findings were based on the activities and behaviors of 769 client foundations on whose behalf Foundation Source processed grants, paid expenses and reported investment information. All foundations in the study had assets of less than $50 million and had been in existence for at least three years.
Key Findings
The average 7.6% distribution rate for 2014 was nearly identical to the previous year’s rate of 7.5%. Foundation Source said smaller foundations’ ability to match, and even slightly exceed, their 2013 distribution rate was noteworthy in light of the moderate growth of their assets in 2014.
Smaller foundations experienced an overall average asset growth of 3.7% last year, compared with 20.7% growth in 2013.
Foundations with assets of $10 million to $50 million grew by 4.6% in their asset values in 2014, but the smallest ones with less than $1 million experienced a 2% decline.
