Giving Abroad

The spread of democracy has led to a tidal wave of overseas grants from U.S. funds; now some reconsider international gifts

More and more American corporate and foundation dollars are going to overseas causes, but many grant makers are wrestling with big questions about how much money should continue to go abroad — and how it is best spent.

A new report conducted by the Foundation Center and commissioned by the Council on Foundations documents the sharp rise in giving and predicts that it will continue. From 1990 to 1994, grants to charities working abroad from the country’s largest grant makers increased to $679.4-million, from $508.2-million. When inflation is taken into account, international giving by those grant makers rose by 18 per cent. The number of grants for international projects also grew — by 30 per cent, to 6,649.

The growth in international grants has been triggered largely by the spread of democracy in many formerly communist countries. Many foundations have been pouring money into efforts to help the non-profit groups that have sprung up in response to the changes in political power. What’s more, the end of apartheid in South Africa, the emergence of new democracies in Latin America, and the expansion of American companies’ trade with Asian countries, including China and Vietnam, created new opportunities for U.S. foundations in countries where they previously had not been welcome, the report said.

Changes at home have also affected giving: The strong stock market has caused big growth in many foundation endowments, enabling many funds to increase their overseas grants without cutting into the amount they give to domestic causes. Roughly one in nine grant dollars and one in eleven grants went to international programs in 1990 and 1994, the Foundation Center said.

Even so, not all foundations have embraced overseas giving. They say growing demands for aid in the United States may cause them to reduce the amount they send abroad in future years.

The interest in rethinking international grant making is widespread. The John D. and Catherine T. MacArthur Foundation, the McKnight Foundation, and the Rockefeller Brothers Fund are among the foundations that have recently undergone or are still in the midst of assessing and redefining their roles in the international arena.

At the Ford Foundation, such a reassessment has led to an increase in grant dollars abroad. Susan Berresford, Ford’s president, announced last year that giving to overseas causes during her first year at the foundation’s helm increased from 35 per cent to 40 per cent of total grant dollars. In future years, she said, that number would climb higher, although she does not think that it would ever account for more than half of Ford’s giving.

“The line between domestic and international grant making is increasingly blurred,” said Ms. Berresford in an interview. “That is because the world is now our neighborhood and in our neighborhood.”

The Pew Charitable Trusts has taken an opposite approach. During the period covered by the report, its giving nearly doubled, from $18.3-million in 1990 to $36.2-million in 1994, mainly because the foundation sought to promote democracy and civil society in Eastern Europe. But in 1996, the foundation decided to pull back. Its international giving that year totaled just $13.2-million, as it shut down programs in Eastern Europe. Last year it phased out additional grants programs overseas. Pew now gives little to groups based overseas and instead is putting much of its money for international projects into efforts to educate Americans about global affairs.

The new report, “International Grantmaking: A Report on U.S. Foundation Trends,” was mostly based on an analysis of grants of $10,000 or greater that were approved or paid by 821 foundations in 1990 and 1,020 foundations in 1994. Giving by those grant makers represented more than half of all foundation grant dollars in each of those years, and the funds provided more than two-thirds of the estimated international giving by all foundations.

Among its key findings:

International charities based in the United States continued to receive more support than overseas organizations, but the gap is narrowing. In 1994, organizations with headquarters in the United States received 57 per cent of international grant dollars; in 1990, American groups received 67 per cent of those dollars.

The shift in money to charities based abroad has caused a big drop in the money available for international research conducted by U.S. scholars. Foundations provide $52.2-million for research in 1994, a 23-per-cent decline from 1990. Capital support projects for international groups based in the United States also decreased significantly during that time, from $45-million to $23-million.

Total foundation dollars increased to charities working in nearly every major geographical region. From 1990 to 1994, dollars multiplied six-fold to groups that work in Eastern and Central Europe and in the former Soviet Union. That is in large part because of the giving by international financier George Soros, whose foundations have donated hundreds of millions to that region.

Corporate grant makers said they believed that a growing number of companies will become involved in international giving as their business strategies become more global. But that growth, the report emphasized, is unlikely to occur in the poorest regions of the world, since corporations tend to give where they have a direct investment — such as an area where a company has a manufacturing plant and many employees.

As philanthropists have poured money into overseas projects, many say they have realized that to make a difference, they need to spend more to bolster indigenous charities. Many grant makers are now putting resources into helping organizations learn how to raise money and to become more effective managers and activists.

Some donors have been doing that all along. Mr. Soros, for example, has given much of his money to building foundations and charities overseas.

“It’s been his feeling that it’s those people who live in a particular country and experience those problems every day that are most able to make decisions about what are useful programs to fund,” said Michael Vachon, director of communications for Mr. Soros’s Open Society Institute, in an interview.

However, that feeling has not always been widely shared by American donors. “Once upon a time, foundations were helping to present an American presence abroad,” said Loren Renz, head of research for the Foundation Center. “That really has changed now.” Instead, she said, foundations are helping people abroad “reach their own solutions.”

American foundations are not only trying to foster the growth of charities abroad, but to cultivate new philanthropists.

In 1997, the Ford Foundation gave about $12-million to the development of philanthropy abroad, including $3-million to create a new grant-making organization that will support economic development in Bangladesh.

“Increasing numbers of foundations are being created as new wealth grows and as societies recognize the value of an independent sector complementing government and business,” Ms. Berresford said. “A good number of foundations are supporting these new institutions, helping them develop new assets — financial and human assets — and create grant-making practices that fit each particular setting.”

Big foundations like Ford continue to be the major players in international philanthropy, the new report said. In 1994, 71 per cent of international giving was provided by foundations with assets of at least $250-million.

An explosion of new foundations in the last 20 years, however, has diversified the sources of international giving.

Five of the top 25 foundations making international grants were formed since 1980. They include:

The Open Society Fund and the Central European University Foundation in New York, both created by George Soros.

The Lincy Foundation in Las Vegas, endowed by the billionaire investor Kirk Kerkorian to support Armenian causes.

The Moriah Fund in Indianapolis, created by the late Robert and Clarence Efroyson. It supports community development and other programs in Israel and in developing countries throughout Latin America and elsewhere.

The Annenberg Foundation in St. Davids, Pa., whose primary focus has been on education in this country but which has also financed educational and cultural groups in the United Kingdom — where founder Walter Annenberg was once U.S. ambassador. It has also made grants in Israel and to other international projects.

Some grant makers said they hope in future years to increase the amount of money they give to the poorest areas of the world, especially sub-Saharan Africa, according to the report. Others said they will direct more to areas of ethnic conflict, like the Middle East.

South Africa has been one of the major beneficiaries of foundation interest in recent years. With $26.3-million donated in 1994 to charities based there, South Africa was the leading recipient country of overseas grant dollars. England was second, with $21.9-million.

“All the eyes of the world are on South Africa,” said William S. White, president of the Charles Stewart Mott Foundation, in an interview. Mott gave $2.6-million to South Africa in 1997. “South Africa is trying to bring about a fundamental change in race relations and government and is trying to do it in an inclusive and peaceful manner. If South Africa can make it, it’s a good model for the rest of Africa.”

Even though Mott is one of the foundations that continues to have a strong international program, it is one of many grant makers that say they feel under pressure to turn to domestic causes.

Foundation officials say cuts in federal social programs, as well as concerns about the increasing economic inequality among Americans, have forced them to think hard about how much they should devote to overseas aid.

Balancing international aid against domestic is very hard, said Mr. White.

One of Mott’s largest grant-making programs finances welfare-reform projects — and the foundation has felt pressure to increase spending there now that the federal government is making big changes in antipoverty programs. But Mr. White says he is leery of doing so at the expense of international programs because he believes that Mott’s domestic programs are stronger today because of the foundation’s overseas work.

“The world is still a very troubled place, and it worries me that all over the U.S. we have suddenly turned to this very local perspective of looking at home,” he said. “The security in Flint, Mich., in regard to environmental programs depends on whether we can get better environmental laws and regulations in countries overseas,” he said.

* * *

To order a copy of “International Grantmaking: A Report on U.S. Foundation Trends,” call (800) 424-9836 or write to Foundation Center, 79 Fifth Avenue, New York 10003. The book may also be ordered through the center’s Web site at http://fdncenter.org/book. The cost is $50 per copy, plus $4.50 shipping and handling.