Philanthropy Class (10/7/2004): John David Goldman

We spent the first part of the class talking about different philanthropic structures, and their commonalities and differences. Quick summary:

Donor Advised Fund

Typically within a Community Foundation, a Donor Advised Fund (DAF) allows the donor to take a tax deduction as soon as the donation is made, but still retain semi-control over how and when grants are made to non-profits. The donor can make suggestions, which the foundation typically honors, unless they're improper (not to a 501(c)3 for example). Donor has limited say in how endowment funds are invested (perhaps choose 1 of 4 available investment pools). Can be established with as little as $10,000.

Supporting Organization

Like a private foundation, but one within a Community Fund. Easier to set up than a private foundation, and lets you leverage the expertise of the Community Fund staff, but gives control not only how the funds are dispersed (as in a DAF), but also how the endowment is invested. Typically requires millions of dollars.

Private Foundation

A new organization, that needs to file its own tax returns (or PF 990). May have its own staff (though most foundations do not have staff). Control over how the money is dispersed and how the endowment is invested. Typically requires $10M+ in order to be worthwhile to pay the accounting, set up costs.

Funding Intermediary

An organization like the Global Fund for Women that aggregates donations from many people but pays out everything collected in the same year. Program officers evaluate organizations to select worthy ones, and the power of pooling enables the intermediary to make a sizable gift.

Federated Giving

An organization like United Way that collects donations from members of a community and re-distributes them to essentially all of the non-profits within that community. Donations are paid out in the same year, and the donors have no say in how the funds are allocated.

Donor Directed Funds

Similar to DAF, but typically set up at a financial institution (rather than a community foundation) as such, provides no expertise, but comparable tax benefits and control of grant requests.

During the second half of the class, John Goldman spoke, describing his views on which structures worked best for what types of grants (smaller, recurring grants out of a DAF, larger, more strategic grants out of a private foundation or supportign organization.) He also gave some background on the Jewish Community Federation (making $23M grants annually) and its Endowment fund (paying out $80M per year, with a $750M endowment). He answered questions about the grant selection strategy (moving more toward a program of objectives and assessments in the style of venture philanthropy), as well as thoughts about payout rates (feels that at least 5% should go to grants, not counting overhead, and has pledged 10% of his own). He stuck around after class to field additional questions, a bit more personal, describing his motivations, transition from the corporate world, and inclusion of his (young) adult children in the philanthropic process.