Private and family foundations increased their charitable giving for the second year in a row during 2021, following the well-documented ramping up in response to the pandemic and racial justice movement.
Giving by grantmaking foundations in 2021 rose by 6.1% as compared with 2020, according to a year-over-year analysis of giving by nearly 1,000 foundations with total assets between $1 million and $500 million.
Foundation Source, a management consultancy to philanthropic organizations, compiled the data from grants and expenses it paid on behalf of 948 of its foundation clients, as well as from transactions, balances, tax returns, and investment information provided by their financial institutions.
Collectively, the data released showed those foundations gave $689 million in 2021, a $40 million increase compared to what they awarded during 2020. Although the increased rate of giving didn’t account for inflation, the percentage increase still exceeded the 2021 inflation rate of 4.7%.
The foundations studied were broken down into three categories consisting of larger foundations ($50 million to $500 million in assets), mid-sized foundations ($5 million to $50 million in assets), and smaller foundations ($1 million to $5 million in assets).
While larger foundations accounted disproportionately for the overall increase by awarding 21% more than the previous year, smaller foundations gave away more as a percentage of their assets. All three categories of foundations studied increased the giving as a percentage of assets beyond the annual mandatory distribution of 5% for tax-exempt foundations, led by smaller foundations which did so at a 8.9% clip followed by large foundations (7.1%) and mid-sized foundations (6.4%).
Gillian Howell, head of client advisory solutions at Foundation Source, attributed the increased giving by smaller foundations to success at growing asset bases through their increased contribution rate — which, at 9.9%, was nearly double the contribution rate increases seen by large (5.7%) and mid-sized foundations (5.1%).
“(Some) small foundations are in the process of building up their endowment with higher annual commitments. Second, some smaller foundations are operated as pass-throughs where all or most of the assets that are contributed each year are granted out,” she explained.
Despite the overall increased giving, the authors of the study reported a decrease in the number of grants given by foundations during 2021, which they suggested could signal a shift from a focus on providing emergency aid to as many people as possible in 2020 to a greater focus on designing grants with a more targeted impact in 2021.
The finding was further supported by data showing a decrease in the amount of grant support for human service organizations and an increase in grant support for education, arts and the environment, all of which further suggested a return to pre-pandemic priorities, the authors wrote.
“While some of our data indicates a return to pre-pandemic behaviors, the spike in giving over the last year could be a signal that the shocks of 2020 have had a lasting impact and set dedicated philanthropists on a new trajectory to address needs in a less reactive but increasingly generous way,” said Sunil Garga, president and CEO of Foundation Source.
“As the market winds have shifted again in 2022, it remains to be seen what will take place next, but foundations will likely rise to the occasion. More than any other charitable giving vehicle, foundations are equipped with a powerful and versatile philanthropic toolkit for creatively solving problems and effecting change.”