FN&C asked: Is it better to spend out a foundation’s assets in a fixed number of years, or is it better to endow a foundation in perpetuity? Why?

A note about our unscientific survey: We called about three dozen foundations and nonprofits completely at random, without prior knowledge of how respondents felt on the issue, seeking only to capture sentiments from the field in a man-in-the-street format. The responses we heard largely favored perpetuity.

John Blum, Principal Manager, Margoes Foundation, San Francisco, California
That’s like asking how many angels fit on the head on a pin—it really doesn’t make much difference. It depends on what the trustees and board wants. Our trustees are allowed to spend principal as well as interest—there’s no mandate one way or the other. They’d like to continue it for a few years, but they’d like to try to do some useful things. Nothing’s forever—you should have fun while you’re doing it. It’s an interesting concern, but not terribly important.

Mary M. Jalonick, Executive Director, Dallas Foundation, Dallas, Texas
My opinion is that it should be done in perpetuity—that would continue on a person’s philanthropy forever. Of course, it depends on what the donor prefers. But it benefits the community more if it’s done in perpetuity. As long as the donor is specific about the guidelines, their wishes will continue to benefit the community.

Mollie C. Determan, Vice President and Manager, Hubbard Family Foundation, Seattle, Washington
I certainly think foundations should exist in perpetuity—they provide a purpose forever. I work with many of them and see the wonderful results. I’d hate to think that wouldn’t last forever.

It helps to make sure that the donor’s intent is going to be followed out. There are many things in place to make sure that a foundation does follow donor intent. We’re regulated in the state of Washington by the attorney general, by our own auditors, the federal auditors, the reputation in the community—they know about the intent of our foundation and expect it.

David D. Beischer, Executive Director, Fox Family Foundation, Durham, North Carolina
I think it depends on the mission statement and purpose of the foundation. Our foundation right now is set up to exist in perpetuity, but as conditions change, it depends on what is required. It also depends on the donor’s intentions. Our foundation started in 1991 when my grandmother wanted to set up a charitable organization to do some giving and for estate planning reasons. Being in perpetuity is nice because it will last far longer than you’ll be around. My grandmother is still alive and it’s nice for her to know it will be around for a long time. If ever there was a time it needed to end, she’d be amenable to that. I think it’s nice from the donor standpoint to know it’s going to be around in the future.

Sidney Armstrong, Executive Director, Montana Community Foundation, Helena, Montana
Our business is endowment. People get involved with community foundations because they believe that a fund to continue to support the arts and communities is the best way to go. First of all, endowment builds capacity for an organization, simply by taking that long view. Second, it provides continued sustainable funding.

If you are talking to people who are discussing a private family fortune, if there won’t be a family member to sit on a board, then spending it over the person’s lifetime might make sense. The two aren’t necessarily opposing viewpoints.

But the whole notion of community foundations is building endowment for the community, for long-term community building. The questions are: What is your central purpose? What is your mission? Community foundations are in it for the long haul.

We talk about the funds that Benjamin Franklin created with money that wasn’t to be touched for 100 years. I think it was Albert Einstein who said the most incredible invention of all time was compound interest.

Robert W. Ashton, Executive Director, Bay Foundation, New York City
At the Bay Foundation, we take the position that it would be more responsible to give at a sustainable level. In effect, we can continue giving into the future rather than a fixed time. We are established under a mandate as if it were in perpetuity. We’ve indexed our giving to inflation—we will give increasing purchasing power every year, and yet we’re making those on the board who wish to see us grow happy, too. We were giving at 7 percent in the past, but the windfall of growth has allowed us to increase our giving and not increased the percentage. We’ve gone from 10 million to 19 million in investment.

We give for operating support, and I would think that the children’s services that we give to would find it nice to think that we’ll be there in the future. We rotate our giving to spread our dollars around. Basically, I don’t know of anyone who thinks that day care centers that are only going to be there for a year or two.

Charles Schusterman, President, Charles and Lynn Schusterman Family Foundation, Tulsa, OK That’s a complicated question. I think it depends upon who the donor is and what his or her intent is. A donor can really only look out two generations at most, and possibly only one generation. The world changes rapidly, therefore donors need to think about what their intent is and how they see future generations. I think it also depends upon the size of the foundation. [Our foundation] hasn’t answered that question because I think it does depend on a multitude of factors; the world does change quickly. I think it helps to look at two different circumstances.

Let’s say donor Joe Smith starts a foundation when he is 75–80 years old. He probably would not have the skills to spend it down during his lifetime, therefore, he would certainly need a time frame into the next generation. But at that age, he might also have an idea of what the second generation looks like. To that extent, if Joe wants to craft a vision for X period of time, then he might talk about spending it down in 50 years or so—that would still be beyond his life, but he would understand the trustees’ capability to intelligently spend down the foundation’s money.

Now, let’s look at perpetuity. If Joe Smith is comfortable with it passing through bloodlines and doesn’t care where the money is ultimately going, but trusts the bloodlines, I think that meets his desires. Therefore, that’s appropriate. If he thinks that his specific intent, as he sees the world now, would be accomplished through bloodlines—I think he is kidding himself; the world changes. If he views things along his bloodlines, he might put different mechanisms in so that the foundation can change with times in the future.

There is no pat answer—it depends upon the donor, on his or her intent, and his or her individual family circumstances.

GRANTSEEKERS

Julie Gamble, Executive Director, Albuquerque Speech, Language & Hearing Center, New Mexico
I would like to see foundations continue to exist. I think they should use the interest and save the principal. Yes, I would like to have money now, but we need to keep some around for the future.

David Corey, Senior Development Officer, World Learning, Brattleboro, Vermont
As a person who is on the grantseeking side of the fence, my attitude is that [foundations] ought to be in business for as long as possible and be available to those of us who need assistance. If it were the other way around we wouldn’t be able to get the help we need. I can see from the donors’ point of view; they have an objective to reach, and when they reach it, they can close the door.

The other thing to keep in mind is that if a foundation stays in business and has an enlightened investment practice, then the foundation will actually grow.