In two new publications that examine the payout and spending practices of roughly one thousand U.S. foundations, the Foundation Center reports that most large endowed independent foundations paid out at or above the mandated rate of 5 percent during the 2007-09 period and that the single most important factor affecting a foundation's expense level is whether it employs paid staff.
According to Understanding and Benchmarking Foundation Payout (20 pages, PDF), 46 percent of the large endowed independent foundations in the sample spent between 5 percent and 5.9 percent of their net investment assets on charitable distributions, while nearly one in five reported average payout rates at or above 10 percent. The report also found that because many endowed foundations maintained their charitable distribution levels in 2008 and 2009 even as net asset values declined, the median payout rate increased from 5.4 percent in 2007 to 6.4 percent in 2009.
The second report, Benchmarking Foundation Administrative Expenses: Update on How Operating Characteristics Affect Spending (7 pages, PDF), looks at how differences in infrastructure, operations, and programmatic activities influenced spending patterns at nearly twelve hundred large foundations. The analysis found that foundations that regularly engage in international grantmaking and/or foundation-administered programs or that make grants directly to individuals have expenses-to-qualifying distribution ratios that are roughly twice as high as those that do not. Both reports were funded by the Charles Stewart Mott Foundation.
"While the very top grantmakers tend to pay out close to the 5 percent minimum, there is surprising variation in payout levels of larger foundations overall, and annual rates are affected by drastic changes in the stock market," said Loren Renz, the Foundation Center's vice president emeritus for research, who authored both reports. "Only by averaging these rates across multiple years can a balanced view of payout practices be realized."