The Philanthropy Of The 98 Percenters

Donate - Purple ButtonWhile most of the media spotlight is cast on the issues of Big Philanthropy, such as the Giving Pledge or philanthropic ideas of Bill Gates or Warren Buffett, this has little relation to how most Americans give.

Source : Forbes, by Kasia Moreno

There are some 86,000 philanthropic foundations in the United States, and 98% of them have assets of less than $50 million. This high number of private foundations has its roots in typically American characteristics.

First and foremost is American generosity. Nathalie Sauvanet, head of individual philanthropy, BNP Paribas Wealth Management, told me that “Americans often start feeling comfortable about their level of wealth quite early and begin to start thinking about giving around the time they make their first million. It’s the optimism of the American dream, the belief that even if they make a mistake and lose money, they will succeed again and get even wealthier.” In contrast, Europeans do not start feeling secure until they amass much larger fortunes.

Another reason is that in the U.S. philanthropy is often used for healing purposes, helping to come to terms with death or another type of tragedy. There are many foundations in memory of people who died from certain diseases, were murdered, kidnapped or victimized. Their families hope to honor their memory by setting up foundations aimed at preventing similar tragedies from happening to others.

Such smaller foundations are the clients of the Foundation Source, an organization that provides services for private foundations. The Foundation Source has just released the 2014 edition of its Annual Report on Private Foundations. It is based on the actual transactional data of more than 700 foundations. The majority of the foundations in this study had assets between $250,000 and $5 million, and were between five and nine years old.

America’s 98 percenter foundations had a good year. Average foundation endowments grew by 14.1%. This was the second straight year of asset growth by the foundations in the study. That growth was the product of both investment returns and new contributions to the foundations by their funders.Charitable distributions averaged 7.3% of assets, well in excess of the IRS-mandated 5% payout requirement. However, aggregate giving in real dollars was slightly down in 2013 from 2012, suggesting that some of the foundations in this year’s report used 2013 as a “rebuilding” year.

There were some interesting and somewhat counterintuitive trends. For example, the smaller foundations analyzed in the study, those with assets of up to $10 million,  gave proportionately more in general support grants, versus grants to specific projects, than did their bigger brethren. This may suggest that smaller foundations do not have the capacity to do project-specific research and evaluations.

I found the causes to which these smaller foundations give also somewhat counterintuitive. Overall, in the U.S., health, environment and education are the top causes in need of philanthropy, according to the 2014 BNP Paribas Individual Philanthropy Index. For the 98 percenter foundations, education is the top cause, followed by human services, and arts and culture. Health and environment are lower down the list. I was especially surprised that animals as a cause were low on the list.

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