Overview

A family foundation gives grants funded both by investment returns and annual giving.

The Needmor Fund, a Toledo, Ohio-based family foundation that supports community organizing, has an unusual payout policy. The 6% paid out of its endowment is supplemented each year by annual gifts from about 10 family members that are earmarked for annual giving. As a result, payout from the $28 million foundation is between 9% and 12% each year.

The foundation, which is 50 years old, established the payout policy in the late 1990s, during the discussion of the payout debate. "We were going through a period of rapid growth, as were many," says Sarah Stranahan, a board member and former board president. "We didn't actually know what the payout was ­­- and we discovered that it was actually 13%, with 5% coming from the endowment. We needed to make a proactive payout policy. We wanted the endowment to maintain its purchasing power in the future, but our goal was not to become a bigger foundation. We calculated that with 2.5% for inflation and 1% for management fees, and the fact that we were making an average of 9-11% over the last 25 years, that we could pay out 6%."

Additional funds come from family members who make annual gifts (in 2007, $400,000, plus $480,000 from the lead trust of a family member who died in the 1990s). The 2007 grants budget is $1.85 million; administration costs are $641,000. To facilitate planning, the foundation sends out letters in January asking donors if their gift will be the same. It also keeps its donors informed through a newsletter, as well as an annual board meeting open to all family members - a two-day event that features a site visit and a panel discussion. "It's an incentive for excellence," Stranahan says. "If the foundation is doing such exciting enough work that living donors want to put money there, that's a high bar." Three generations of the family participate.

Needmor is also committed to using all its resources to support its mission. It screens 100% of its investments, 15% of its assets are in community development investments, including certificates of deposit in community development financial institutions, and it has an active shareholder advocacy program, involving its grantees. And while the foundation wants to be able to continue funding into the future, Stranahan says, it "would never turn down the opportunity to make a difference now." The investment and mission guidelines also encourage the board to consider spending down or merging with another entity should the assets drop below $20 million, making the administrative cost of grantmaking too high a proportion of its assets.

Additional funds from family members have given Needmor the opportunity to undertake some special projects. For example, in the 1990s, a $2 million gift was put towards helping small community organizations have a voice in national welfare reform; as Stranahan puts it, "People had a place in the debate who wouldn't otherwise have been there." In the final year of a $300,000 legacy, given over three years, the foundation decided to make one-time gifts to some of its core grantees, rather than start new relationships or put the money into its own endowment. "They are still strong," she says.

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  Resources

• Executive Summary
• Full Report
• Order Print Copies

  Report Contents

• Introduction
• Focus: The Whitaker Foundation and the Helen F. Whitaker Fund
• The Learning Curve: The Beldon Fund
• Retooling for Spend Down: The Atlantic Philanthropies
• Giving While Living: The Richard and Rhoda Goldman Fund and the Lewis B. and Dorothy Cullman Foundation
• Quick Spend Down: The Haigh-Scatena Foundation
• Raising the Payout: Evelyn and Walter Haas, Jr. Fund
• Giving 5.5%: The Lynde and Harry Bradley Foundation
• More than Investment Returns: The Needmor Fund
• Ramping Up: The HKH Foundation
• Using All the Models: Endswell Foundation / Renewal Partners
• A Different Strategy: Omidyar Network
• Conclusion
• Selected Bibliography
• Resources
• List of Profiled Foundations
• Acknowledgements

  Upcoming Events

• November 29
  10am - Noon
  NCG Family Philanthropy Exchange and the Stanford Center on Philanthropy and Civil Society are hosting a discussion of Beyond Five Percent: The New Foundation Pay out Menu. This funders only event is free for members.
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  Supporters of
  “Beyond 5%”

• Beldon Fund
• French American Charitable Trust (FACT)
• Quixote Foundation

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