Philanthropy Class (10/19/2004)

Lecture today focused on the grant-making process, especially the evaluation portion, as we considered different elements of the requesting organization (like its organizational capacity and financial management) and the grant itself (including the leverage and impact of the proposal).

From a foundation's point of view, we looked at the funding strategy and how that impacted the spending strategy and investment strategy. Leading to a (staged) debate between the goal of keeping a foundation around in perpetuity versus the plan to spend down within the donor's lifetime (or one generation after). The arguments for a quick wind-down were primarily that money was needed now for urgent needs, and so should be spent now rather than hoarded. Immediate spending was more likely to maintain the donor's intent and unlikely to succumb to excessive bureaucracy. On the flip side, maintaining the foundation in perpetuity enables it to serve future needs, take advantage of future innovation, build a knowledge base, and focus on problems and projects that have long time horizons.

We closed the class with a brief discussion of the 5% payout rate and whether "non-investment administrative expenses" should be credited toward the 5% of a foundation's endowment that must be spent each year, or whether only strict program expenditures should count.