With the majority of 2023 still ahead of us, I’m pleased to share good news for private foundations and their prospective grantees: Our latest client survey, to which 215 private foundations responded in late December 2022 and early January 2023, reveals a strong sense of optimism for the future, including foundations’ intent to:
- maintain or increase their level of giving in 2023
- better understand succession, how to transfer the leadership of their foundations to the next generation of their families and boards
- learn from each other
- explore new ways of giving by leveraging the unique capabilities of private foundations
Given the 2022 market downturn and today’s continued economic challenges, this feedback is encouraging. Rather than reacting to short-term dynamics, foundation donors are positively focused on the long term to build deep-rooted philanthropic legacies, collaborate and innovate their giving.
Here’s further insight into donor behavior as well as tips for prospective grantees as they seek private foundation support.
Steadfast and Increasing Generosity
Out of our 215 respondents, the majority (74%) indicated no change in their foundation’s grantmaking activities during 2022, despite the market downturn. Rather, they stayed the course and their generosity persisted. Of those who did make changes, most expanded their giving by increasing the size and number of their grants. Likewise, Schwab Charitable, one of the largest national providers of donor-advised funds, reported an increase in grants to more than $4.7 billion with a record 995,000 grants to more than 117,000 charities in 2022.
When looking ahead to 2023, most Foundation Source survey respondents (58%) said they plan on keeping their charitable giving similar to 2022 or increasing it slightly (20%). With respect to foundation assets, results are uplifting as well: 42% of respondents said they plan to add to their endowment in 2023, with 61% of that group saying it will be a planned addition and 18% saying it will be because of a liquidity event.
Future Focus: Long-Term Mindset, Innovative Giving
When asked what foundation issues they’d most like to explore in 2023 for learning, our respondents’ top three preferences were: managing succession (43%); hearing from and exchanging ideas with other funders (32%); and leveraging the unique giving capabilities of private foundations (29%). Donor-advised fund provider Charityvest also predicts that more donors will engage in growing trends like “trust-based philanthropy,” which encourages giving larger, more unrestricted grants for nonprofits to use as they see fit. Each of these interests indicates forward-thinking; donors want to secure solid future leadership and are open to new ways of giving.
Grantee Guidance
For prospective grantees of private foundations, our survey results are certainly hopeful. They prompt us to offer the following considerations for grantees as they approach foundations for support in 2023:
When it comes to formal charitable giving vehicles, private foundations offer the most flexibility and creativity for philanthropic endeavors. As our respondents expressed interest in exploring the additional ways (beyond traditional grantmaking) that foundations can give, it behooves grantees to understand such capabilities as well and tailor their funding proposals accordingly. By proposing projects that will enable foundations to give in these different manners, grantees may increase their chances of receiving support.
Here are some examples of the unique ways that foundations can give:
- Provide program-related investment loans (PRI loans)
Besides making grants, a foundation can make no or low-interest loans to charitable organizations and use the proceeds from the repayment of that loan to make other programmatic investments. And just like grants, PRI loans count toward the foundation’s 5% minimum distribution requirement. This type of giving may offer the charitable organizations the dual benefit of improving their creditworthiness if the loans are repaid in full.
- Give program-related loan guarantees
Loan guarantees are a way for foundations to give – often without spending a dime. A foundation can arrange a loan guarantee between itself and the financial institution for a charitable organization, allowing the latter to finance an activity (such as expansion, hiring or inventory) on more favorable terms than the organization might otherwise receive.
- Give awards and prizes to spur progress
Foundations can support prize-based philanthropy, such as funding a scholarship program or awarding research grants, to motivate a greater number of people and leverage their creativity for a charitable cause.
Keeping these giving options in mind can help grantees “think out of the box” when proposing projects for funding and perhaps introduce foundations to new avenues for their support.
Given foundations’ intent to give the same or more in 2023, here are the key questions prospective grantees can expect them to ask when considering where to deploy their dollars:
Does your organization …
- align with our passions and values?
- meet a critical need and make a positive impact?
- have a strong and active board of directors?
- have a positive reputation and rating?
- have transparent financial reporting?
- welcome site visits from donors?
- measure and report its results and impact?
Our client survey findings underscore how the mission-oriented private foundation structure can encourage donors, regardless of market conditions, to remain committed to their causes and serve communities around the world. In 2022 alone, our 2,000+ private foundation clients made more than 47,000 grants totaling over $1.5B in charitable gifts. Their level of generosity is inspiring. We look forward to seeing the philanthropic impact they – and all charitable donors – make in 2023.
Gillian Howell is the head of client advisory solutions for Foundation Source, the nation’s leading provider of management solutions for private foundations.
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