MIT Office of Foundation Relations

The Great Recession: Impact on Boston-area Philanthropy

ofradmin — Fri, 15 Mar 2013 12:01:43 +0000

The Great Recession, beginning in 2007, marked the most serious global economic decline since the Great Depression of the 1930s. This economic downturn had significant effects across all global sectors–effects that will resonate well into the future. In a recent report commissioned by the Boston Foundation, researchers at Boston College investigated the implications of the financial crisis on Boston-area philanthropy. In particular, they focused on the transfer of household wealth and the evolving philanthropic landscape of the Greater Boston area.

To better understand the effects of the Great Recession on philanthropy, the researchers at Boston College first examined what happened to household wealth during the economic decline. Between 2007 and 2009, 91% of households in Greater Boston experienced a decline in net worth, and those households with a net worth of under $100,000 experienced a larger loss of wealth than those with a net worth of $1 million or more. Despite these grim numbers, the implications on Boston-area philanthropy, on the whole, are very positive. The report found that the average household net worth increases with age, only dipping slightly in households headed by people aged 70-79. Older households are more affluent, and consequently were not hit as hard by the economic downturn as their younger counterparts. As a result, the older generations will be transferring more of their wealth in the near term, which will positively impact charitable giving.

To analyze the impact of their findings, the researchers at Boston College explored some emerging trends that will continue to change the way wealth is transferred in the future. An increasing number of donors are taking an entrepreneurial approach to philanthropy through setting up donor advised funds. This vehicle enables individuals to play a larger role in their own wealth transfer by eliminating the hassle and administrative expenses of a private foundation. In addition, the report highlighted a shift from wealth transfer through bequests, to wealth being distributed during a donor’s lifetime. Currently, lifetime giving accounts for 13%-17% of wealth transfer. As shown in the chart above, by 2061, that amount is predicted to rise to 64% (assuming a 2% annual growth rate for Massachusetts GDP). As a result, the potential for charitable giving over the next five decades is quite large, and offers a vast array of opportunity for the Greater Boston region.

Access the full report here.

Lessons from Billionaire Philanthropists

ofreditor — Wed, 13 Mar 2013 16:51:30 +0000

As we look back over the past issues of OFR in the know, one topic that is consistently reported on is the Giving Pledge. We are increasingly hearing how the wealthiest individuals and families in America are committing themselves and their money to making a difference through philanthropy. There is much to be learned from these prominent individuals, and the BridgeSpan Group has offered us a rare opportunity to glean some advice from the experts with their new project, “Conversations with Remarkable Givers.” Bridgespan has conducted video interviews with more than 54 U.S. philanthropists and foundation leaders with an attempt to make philanthropy more effective through lessons and stories from some of the country’s most prominent billionaires.

During these 2-3 minute videos, individuals from some of the largest and most recognized foundations discuss their personal experiences on giving, and reflect on their philanthropic journeys, sharing wisdom and advice to other givers. There are some common themes that are present in many of the philanthropists’ videos, some of which have been featured in past digests. Not surprisingly, one of the frequent topics discussed in the videos is the desire to make an impact through giving, especially one that can be measured. Many of the billionaires view philanthropy as an investment, one that goes beyond just writing a check. In his video, Pierre Omidyar, founder of the Omidyar Network, spoke about his decision to move away from a traditional foundation and instead, create a network to invest in for-profit organizations as well as traditional grantmaking to further his impact.

Additionally, many of the billionaires that were interviewed advised new philanthropists to start giving immediately. Laura and John Arnold, co-founders of the Arnold Foundation, commented that they “enjoy the challenge of giving money away effectively,” and go on to say that they do not want their resources to be allocated after their death when it is beyond their control.

Watch the videos here. And read more from Forbes here.

Four Steps to a Stellar Grant Proposal

ofreditor — Tue, 12 Mar 2013 16:54:50 +0000

A post that we recently came across on a fundraising consultant’s blog reminds us of the importance of process in submitting grant proposals to foundations. While each foundation has its own guidelines and instructions, breaking the entire application process into these universal steps should make it all the more manageable:

1. Know what the foundation needs from your nonprofit
2. Follow a foundation’s instructions to the letter
3. Express yourself clearly and concisely
4. Submit your proposal early, if at all possible

Follow this link to read the full detail of Sarah Jackson’s advice.

Philanthropy, Impact, and Democracy

ofradmin — Fri, 01 Mar 2013 12:01:18 +0000

While foundations increasingly require (or at least encourage) nonprofits to evaluate the impact of their programs, we have limited knowledge of the impact of foundation investments on a macro level. To address this gap, the Philanthropic Collaborative recently released a report with analysis of both the short and long term impacts of foundation grantmaking on the U.S. economy. With a focus on foundation grants made within the U.S. in 2010 (totaling $37.85 billion), the report reveals impressive short term outcomes, as well as a “cascade of benefits in our communities over the course of decades.” Some highlights include the findings that nearly 500,000 jobs are created immediately following disbursement of foundation grants, and these disbursements will lead to the creation of at least 8.8 million jobs in the long term. For more statistics and analysis, see the full report.

This report comes at a critical time, as Congress and the White House continue to debate the role of the sector. Although perhaps not seeking to directly impact policy, many others are also engaged in the discussion around the role(s) of philanthropy in a democratic society. A recent piece in the Stanford Social Innovation Review lays out several nuanced perspectives.

Given the present low levels of confidence and perception of dysfunction in government, and the independent status of foundations, foundations may be well poised to play a role in “repairing” democracy. As the piece notes, foundations can and do play an important role in supporting unpopular issues, community and civic organizations, and minority views and opinions. However, some are concerned by the potential for unequal voice as a result of unequal wealth (held by foundations), and foundations’ lack of public accountability.

With the concepts of pluralism and majority rule being essential to democracy, there also exists a fear that foundations may privilege plutocratic voice over civic voice.

Please email us your thoughts on this intriguing topic.

Philanthropy Buzzwords

ofreditor — Thu, 28 Feb 2013 16:53:02 +0000

At the end of 2012, Lucy Bernholz identified words that are becoming more a part of the philanthropy conversation. A quick look indicates how influential numbers and data are becoming in the jargon and work of the nonprofit sector. Are any new words or concepts rising to the top yet in 2013? Click here to see Lucy’s full commentary.

How the Internet Will (One Day) Transform… Philanthropy?

ofreditor — Thu, 20 Dec 2012 16:57:33 +0000

In this 2012 TED Talk, Clay Shirky, social media theorist, argues that democracies can take a lesson from the Internet to not only be transparent, but also to draw on the knowledge of all their citizens. Watch the video here (and perhaps some of his other interesting talks here). Then, we ask you to consider how these ideas may (or may not) relate to foundations, philanthropy, and/or higher ed.

Foundations and Multi-Year Grantmaking

ofreditor — Thu, 20 Dec 2012 16:56:29 +0000

We follow last month’s piece on general operating support vs. program support with a look at another tension in the non-profit world: multi-year grantmaking. There has been attention for some time on the importance yet difficulty in obtaining multi-year support from foundations. In a 2006 report, the Center for Effective Philanthropy noted “it is not operating support alone that generates higher ratings of impact on the grantee organization, but rather operating support of sufficient size and duration.” The tenor in the call for increased multi-year grantmaking (by non-profits and even some foundations) has reached a new high in the wake of the recession. While it is expected that multi-year funding (defined as a firm commitment to at least two years of funding, not merely a series of distinct grants provided to the same recipient on an annual basis) has declined significantly in the last few years, many are concerned that unless the decision makers of foundations take serious steps to re-establish multi-year giving as their assets start to rebound, nonprofit organizations and the communities they serve are in for years of increasing uncertainty and diminished impact. For the full story and many interesting supporting statistics, click here.

New Resources

ofreditor — Wed, 19 Dec 2012 16:58:44 +0000

Great for content on issues and different perspectives on the field of philanthropy:

Foundation Center’s IssueLab
BBC News: The Business of Giving

Big Data and Philanthropy

ofreditor — Wed, 21 Nov 2012 17:00:43 +0000

In today’s world, industries are quickly learning how to harness big data in near-real-time to reap big return on investment. Meanwhile, philanthropy, an industry with $640 billion in assets, lags behind in terms of generating value from data in a timely and comprehensive way. A new initiative by the Foundation Center aims to change this, in a way that some say will transform the practice of philanthropy.

For years, the Foundation Center has been the authority on foundation data in the U.S., but in many cases, the industry has relied on two-year old data to understand its own grant trends. Last month, the Foundation Center announced the “Reporting Commitment,” in which fifteen of America’s largest foundations (including Carnegie, Gates, Hewlett, MacArthur, and others) will electronically report their current grants data to the Foundation Center on at least a quarterly basis. In this way, perhaps some of the largest players will inspire change across the field, making philanthropy increasingly open and strategic.

Here is a snapshot of how the Reporting Commitment will work:

Participating foundations will submit their data quarterly, weekly, or even daily so that it can be used by developers to create apps, dashboards, visualizations, and other tools that go well beyond resources currently developed;
GeoCoding tools will allow foundations to compare their grants data with others’ in new ways to make grantmaking more strategic by identifying gaps and areas of overlap in their giving.

For more information, see this article by Bradford Smith, president of the Foundation Center. As he states, “while philanthropy may have been slow to get there, it is finally entering the era of Big Data.”

Restricted Versus Unrestricted Support from Foundations

ofreditor — Mon, 19 Nov 2012 17:03:50 +0000

There is no surprise that general operating support continues to be one of the preferred types of support sought by nonprofit organizations. Unfortunately, many foundations favor restricted support – a fact that has not significantly changed over the past few decades despite efforts by foundations to work more closely with nonprofit entities to achieve common ground. According to a new analysis done by the National Committee for Responsive Philanthropy, Foundations collectively gave 16% of grant dollars as general operating support from 2008-2010, the same amount reported from 2004-2006.

Furthermore, the analysis found that 54% of foundations provided less than 10% of their grant dollars as unrestricted support, and only 14% of foundations provided more than half of their grant dollars as unrestricted support. It is clear that grantmakers overwhelmingly prefer to give restricted support–often forcing nonprofits to come up with additional money to support the costs associated with a grant. The NCRP and other nonprofit organizations are advocating for the importance of unrestricted support to allow nonprofits to be more impactful, to build more capacity, and to develop stronger leadership. Access the NCRP’s analysis on the state of general operating support here.