Spend-out Foundations
In this issue the case for spend-out foundations is examined. Standard models of securing a large endowment which is invested in financial markets to generate recurring income are beginning to be joined by ideas of granting both interest and capital within a specified period so as to set a horizon to the foundation’s activities.
The validity of either is dependent upon the perceived role of gifts (and stocked capital/savings) within an economy and the effects these have upon the circulation of capital. The timing of expenditure of donations also appears to rely upon one’s view of freely given gifts. Whether these merely offset the negative excesses of production or if they are productive in their own right.
“Currently, there are very few foundations in the US and the UK that choose to spend down their endowments within a fixed time frame, as opposed to maintaining them in perpetuity.
In the US, it is mandatory for foundations to pay out 5 percent of their endowments each year, and in the UK there has been much advocacy, so far resisted by the nation’s lawmakers, for the introduction of a similar requirement.
What this implies is that, in both jurisdictions, there is a keen sense that there should be an onus on foundations to make grants. That there should be an impetus towards social change and that the rapid and strategic deployment of private capital is the best way to address a pressing social problem.”1
In the lead piece, Accounting for Donations, Stephen Torr investigates the requirements of the Charity Commission when it comes to reporting income received by UK charities. At times these can seem bureaucratic and little practical use, but do the underlying principles reveal a hidden truth. Specifically in connection to donations related to the purchase or construction of buildings. These are examined and the consequences of the required treatment are expanded to the economy as a whole.
Sign of Our Time features highlights from a talk given by Colin McCrea at the Institute of Philanthropy in London. The advantages of a spend-out foundation are presented along with the disadvantages of both perpetuity and limited life foundations.
This month’s feature is provided by three participants of recent research meetings of the Economics Conference looking at ‘Overcoming the Separation of the Money Markets from the Goods Market’. Aspects of one specific topic, spend-out foundations, are covered here, the remaining areas will be covered in greater detail in future editions of this journal.
The archive piece showcases Rudolf Steiner’s views on the role of freed activity, associations and the differentiation of loan and gift money. The focus is shifted towards the role of donations in maintaining a healthy economic process rather than correcting the negative consequences of production, and as such casts ‘The Realm of Freed Activity’ in a positive, contributory light.
The AEX Pages pick up the question of the third number from last month’s issue as well as revisiting the fertile ground of the use of Mondragon as an example of an associative enterprise. This time however the focus is on the role of education and how its provision enables the connection of value formation to intelligence.
Victor’s View from Rare Albion concludes this month’s edition by looking at the circulation of capital before suggesting the turning of one’s gaze towards the others huddled around the casino tables.
(1) http://www.ssireview.org/blog/entry/to_spend_out_or_not_to_spend_out_what_every_foundation_should_ask_itself