This week-end I bumped into a friend who works for a big UK corporate foundation. We were in a field in Somerset ankle-deep in mud, listening to music, and sipping cider.
She was bemoaning the funding crisis that will hit her foundation at the end of the year. As the effects of the financial downturn trickle through, trustees of grant-making trusts will be forced to cut annual budgets.
A recent survey by the Association of Charitable Foundations, the membership body for trusts and foundations in the UK, found that 55% of grant-makers anticipated that they would have to cut their grant-giving this year, and 75% reported a 'signficant decrease' in investment value over the last 12 months.
That set me thinking. It is a shame that grant-making is affected in the same way as everyone else by recession. Just as demand for charities' services rise, possibly their most important source of funding is cut. Does it have to be this way?
Gordon Brown, the UK Prime Minister, has been criticised for trying to spend his way out of recession and increasing public sector borrowing to record levels. The wisdom of more borrowing might be questioned in politics but might it offer part of a solution in grant-making? Could grant-makers borrow to maintain their activity over the next few years, until their sources of income recover?
Many grant-makers rely on regular sources of income - from the profits of a company or an endowment. Is there a way that they could borrow against these future sources of income and maintain their level of grants in the downturn?
Many foundations have decades (or even centuries) of good credit histories. Surely they are a good bet for lending? Of course practical problems stand in the way, not least culture among trustees. But could this be a potential solution to the forthcoming drop in grant-making and a way for innovative foundations to prove their value? Given that the grants given over the next two years are likely to be more valuable to charities than ever, might this even be a way of increasing foundations' impact in the long-term?
Is this a new idea? What do you think: good or bad ? Comments are welcomed.
Tuesday, 30 June 2009
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2 comments:
Well, the idea make me a little jittery I have to say.
The logic is clear. Borrow carefully now, to meet the increased demands of charities in these difficult times; pay back the loan with investment income/growth when times are better AND demands decrease. Sounds like a win-win.
It also sounds, perhaps unsurprisingly, like the "International Finance Facility" which Gordon Brown was trumpeting a few years back - sell bonds to increase overseas aid now, pay it back in future with aid budgets when the demands on those budgets consequently decrease. It's the epitome of a 'Keynesian' solution.
But it's a gamble. Just as the outcome of the present macro-economic policy is genuinely unclear at the moment, so one cannot be absolutely sure that demands on Trusts and Foundations will decrease sufficiently in future to enable debts to be serviced without eating away at much-needed grants funds.
It's also a slightly paradoxical proposal when I think that everybody would wish to see the voluntary sector grow - growth which would be stymied if Trusts had to use grant budgets to service debts.
It's therefore not a bad "emergency" policy, if, indeed, we're facing an emergency. A look at the balance sheets of the Trusts that I oversee suggests that it may well be - some, which are hundreds of years old, have lost 33% of their value in less than a year. Yet, even so, can I envisage the Trustees whom I serve taking such a step? Probably not - and I have been very successful over the past year at encouraging them to be radical!
A thought: might another solution be to find some way of unlocking the funds of the many (often geographical restricted) foundations which struggle to find beneficiaries? In my experience, there are many that struggle to spend money - including some of those that I look after.
Often, these are smaller organisations, but I wonder if the Charity Commission couldn't accelerate their present encouragement of mergers and put forward a programme which would allow small grantmakers who struggle to spend their income a way of both liberalising their objects, and pooling their resources?
I wonder if this would have sufficient impact? Would smaller foundations be amenable to a "sledgehammer" policy which might diminish their identity, if the outcomes for beneficiaries were clear and substantial?
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