Grant Making in 2006 Not Expected to Rise Much, New Report Says

Total giving by grant makers in the United States hit a record $33.6-billion in 2005 — an increase of 5.5 percent — but sluggish investment returns on foundations’ assets signal a dull forecast for giving in 2006, said a new report released by the Foundation Center, in New York.

The annual report, Foundation Growth and Giving Estimates: Current Outlook, gathered data from 853 foundations, along with year-end fiscal indicators, to project how much the nation’s nearly 68,000 grant-making institutions were giving.

The center said sluggish growth in assets was a key reason that foundations would not be making big increases in 2006. Assets probably grew 2 percent to 4 percent last year, the Foundation Center said, and most foundations base their giving for the current year on the value of their endowments in the previous year.

Although slightly more than half of the foundations surveyed said they plan to increase their giving in 2006, most predicted small gains. And 32 percent said they expect to scale back their grant making. Last year, only 25 percent had reported plans to decrease their grant-making activity.

Donations in 2005 were fairly strong, the report said, because assets of grant makers grew by 7.1 percent in 2004. Nevertheless, it noted that, after taking inflation into account, giving last year rose by just 2 percent. The Foundation Center predicted that in 2006 inflation would eat away almost all of the increases in grant making by foundations.

Another reason 2006 may not see any substantial increases in giving is that grant makers awarded an exceptionally high amount in 2005 — nearly $1.7-billion more than in 2004. Many grant makers increased their giving to provide relief to victims of Hurricane Katrina and the South Asia tsunamis, and also to fulfill long-term pledges, the center said.

The report also noted that the growth in the number of new foundations appears to be slowing. The number of foundations established in 2004 was 2 percent higher than the number started in 2003, the lowest percentage increase in new foundations since 1990.

Community Funds

Community foundations are the only type of philanthropy making big increases in the amount they donate to charities.

Their giving increased by 7.2 percent after inflation and they donated 9 percent of all the money awarded by foundations of all types last year.

“Community foundations, with their donor-advised funds, have been a powerhouse,” said Loren Renz, vice president for research at the Foundation Center. “Wealth is being put into them much faster than it’s going to independent foundations.”

The report also said that giving by corporate foundations appears to be on the rebound after a drop in 2004. Corporations awarded 2.3 percent more last year after inflation.

But the amount given by private foundations, by far the largest category of grant makers, is not rising as quickly, the center said. Grant making by independent and family foundations rose 0.9 percent after inflation.

Foundation Growth and Giving Estimates: Current Outlook is available free on the Foundation Center’s Web site at http://fdncenter.org/gainknowledge/research/nationaltrends.html. Other reports in the Foundations Today Series can be purchased online or by calling (800) 424-9836.