Diversity Still A Challenge At Small Foundations

Small to medium-sized foundations, on average, awarded 73 grants during 2019 and two-thirds provided general operating support to applicants. Board diversity remains a challenge as does equity in grantmaking.

Those are a few data points from the new report, “2020 Foundation Operations and Management Report,” issued by Exponent Philanthropy. The organization’s members are described as “those who practice philanthropy with few or no staff, including: private, operating, community and corporate foundations, individual donors and philanthropic families.

The research team distributed the 2019 survey to 1,812 foundation members of Exponent Philanthropy across the country, and 466 foundation members (26 percent) responded. The foundation members who completed the survey shared similar characteristics to Exponent Philanthropy’s overall membership, according to the report’s authors. 

Among the results of the study are:

Grantmaking Practices and Racial Equity: Slightly more than one-third (34 percent) of participating foundations indicated that racial equity is very relevant to their foundation’s mission. Foundations that rated racial equity as very relevant to their mission were more likely to carry out each of several grantmaking best practices compared to foundations that rated racial equity as not relevant or somewhat relevant to their mission.

Types of Grantmaking Strategies: Participating foundations awarded an average of 73 grants (median of 43 grants) in the most recently completed fiscal year. Nearly two-thirds (65 percent) of foundations provided general operating support to grantees and more than half (55 percent) of foundations provided multiyear grants.

Grant Acceptance and Approval: More than one-quarter of foundations accepted grant proposals and approved grants on a rolling basis, allowing for more responsive grantmaking. In the most recently completed fiscal year, it took an average of 70 days for foundations to receive and approve a grant. Following approval of a grant proposal, it took an average of 29 days for foundations to provide grantees with initial payment.

Board Demographics: Results of the 2019 survey found that boards of participating foundations are, on average, 45 percent female. Family foundations had a higher average number of female board members than independent foundations and other types of foundations. Respondents reported that racial/ethnic diversity on boards is generally low with 75 percent of participating foundations having no board members of color (i.e., had boards entirely comprised of members who identified as White). However, as overall board size increased, the number of African-American and Hispanic/Latino board members also tended to increase.

Succession Planning: More than half (58 percent) of respondents reported not having written plans for the succession of either board chairs or board members. Another 22 percent had written plans for both board chairs and board members. One in four (25 percent) participating foundations with a CEO position reported having a written succession plan for that CEO.

More diverse boards (with one or more people of color; 66 percent) were more likely than homogenous ones (with no people of color or all people of color; 20 percent) to have a written succession plan in place for their CEO, executive director, or other top administrator. 

Participating foundations outperformed market returns during the calendar year 2018. Participating foundations reported mean net investment returns of 0.53 percent and median returns of 0.57 percent. The net investment returns varied somewhat by asset size of the organization. Those returns were for 2018, which had a very turbulent fourth quarter. Overall, the market ended down in 2018 (S&P 500 was down almost 4.5 percent at the end of 2018) but foundations still posted a positive (albeit small) return, according to the researchers.

Only 16 percent of respondents engaged in mission or impact investing, and another 11 percent indicated they plan to engage in mission investing in the next few years. When asked about the most important challenges associated with engagement in mission investing, 38 percent reported the most common challenge was the belief that this approach will not earn the same level of returns.

To see the full 55-page report, go here: https://bit.ly/3aeN5Tn