Smaller Foundations Exceed Payout Requirements in 2009

Foundation Source, a provider of support services for donor led and family foundations, has announced findings that a large majority of its small and mid-size private foundation clients made charitable gifts in excess of their IRS minimum distribution requirement (MDR) during 2009. These foundations are “non-institutional” and are generally led by individual donors and families.

The IRS requires that private foundations distribute at least 5% of average investment assets annually for charitable purposes. According to data collected from Form 990PF filings of nearly 500 Foundation Source clients, 83% exceeded this minimum distribution requirement by at least 0.25% of average investment assets. More than half (58%) exceeded the MDR by at least 5.0% of average investment assets.

The foundations studied generally fall into two groups. Nearly two-thirds (63%) regularly give more than the 5% requirement and entered 2009 with enough grants carried forward from previous years to have already satisfied their 2009 MDR. Nonetheless, these “Zero MDR” foundations continued to give generously, with 84% giving more than 5% of average investment assets, 56% giving more than 10% and 34% giving more than 25%. Nearly half the foundations in this group (45%) increased their giving percentage as compared with 2008.

The second group of foundations, representing 37% of the total group studied, tends to make annual gifts that are equal to or slightly more than the 5% MDR. The data shows that this group stepped up in 2009 as well. 63% increased their giving percentage as compared with 2008, while 21% gifted at the same rate, and only 16% decreased their giving percentage.

The data contradicts the reported decline in 2009 giving among large, institutional foundations as recently reported by the Foundation Center and The Center on Philanthropy at Indiana University. It further supports Foundation Source’s findings published in May showing that the number and size of grants under $1 million grew by 15% over the previous year among 700 of its private foundation clients.