June 12, 2003 | Read Time: 2 minutes
If a legislative proposal to increase foundation grant making had been in effect in 2001, it would have generated more than $4-billion more for charity, according to an analysis by the National Committee for Responsive Philanthropy, a watchdog group that supports the legislation.
Under current law, grant makers must put at least 5 percent of their assets annually into grants and other charitable activities. To meet that requirement, foundations may include rent, travel costs, salaries, and other administrative expenses. But the proposal, introduced last month in the U.S. House of Representatives as part of the Charitable Giving Act, would no longer allow foundations to count such expenses as part of their payout figure and would, in effect, require foundations to give more in grants to charity. Many foundations have objected to the idea, saying they are concerned that if they give away more donations, they might eventually run out of money and be forced to shut down.
Using data from the National Center for Charitable Statistics at the Urban Institute, the committee said that two years ago foundations included $4.3-billion in administrative costs in their payout calculations. If the proposal becomes law, a figure close to that amount could go to support nonprofit groups, the committee said.
What’s more, the 100 grant makers that gave away the most money in 2001 spent $833-million on administrative expenses they counted toward the 5-percent distribution figure, the committee said. Nearly $350-million of that amount went for staff salaries and trustee and executive compensation, it said.
The committee said passage of the proposed legislation would be a “very strong incentive for foundations to rein in exorbitant costs related to board- and executive-compensation packages, travel and office rental, and occupancy costs.”
The Washington group, which advocates greater distribution of foundation assets to charity, said foundations have exaggerated claims that the proposal would hurt their ability to exist in perpetuity and endanger the quality of their programs. “This provision has the potential to pump billions of dollars into America’s charities, without placing a large or unreasonable burden on the nation’s foundations,” the committee said.
The group’s report, “Helping Charities, Sustaining Foundations,” is available for free at http://www.ncrp.org or by contacting the National Committee for Responsive Philanthropy, 2001 S Street, N.W., Suite 620, Washington, D.C. 20009; (202) 387-9177; fax: (202) 332-5084.
