Foundations find endowments shrink as nonprofit demand rises
By Ken Tarbous
December 19. 2011 3:00AM
But as local nonprofits have suffered declines in donations from individuals since the onset of the most recent recession, economic conditions and increased demand from local nonprofits have put pressure on these grant-making foundations to use their capital more efficiently and effectively.
"The challenging part is for us to really rethink how we've done funding and to allocate our limited resources around [our] priorities," said Vaughn L. McKoy, president of PSEG Foundation, which focuses on funding nonprofits and programs on the environment, community and economic development, and education. He said the foundation can't always send a check, "but there are other services that we can provide to these organization in terms of capacity building, accounting, strategy, legal, finance or human resources. A lot of these organizations don't really need cash; they need expertise in other areas."
Foundations — whether they are sponsored by their corporate namesakes with funding, or have endowments or assets of their own that stand separate from corporations — have faced shrinking endowments and increased demand from local nonprofits.
Law requires foundations to give away at least 5 percent of their assets each year, on average. In 2008, foundations suffered a 17 percent drop in the value of their assets, to $564.9 billion from $682.2 billion in 2007, but recovered by 4.7 percent to $621.7 billion in 2010, according to the New York-based Foundation Center, which gathers data on philanthropy.
In 2010, giving by U.S. grant-making foundations was $45.7 billion, close to 2009 levels. But from 2008 to 2009, giving decreased by 2.1 percent, from $46.8 billion to $45.8 billion, according to the Foundation Center.
PSEG Foundation, which is funded by its corporate sponsor, PSEG, has been able to increase its funding of nonprofits to meet that higher demand for services at the local level. In 2006, the donor organization gave more than $5 million and funding increased to $7.3 million by 2010.
But like many of the nation's 75,000-plus donor foundations, The Provident Bank Foundation, which received one-time funding connected to The Provident Bank's IPO in 2003, has seen the value of its assets fluctuate over the past several years, from $32.2 million in 2006 down to $16.6 million in 2009, according to IRS filings. The foundation has had to temper its giving, in what are desperate times for some local nonprofits, with the need to preserve its assets to maintain itself as a going concern, said Kendall Ann Warsaw, executive director of The Provident Bank Foundation, which is based in Jersey City and supports education, health and wellness, culture and arts, and other programs.
"We went well over the 5 percent that we are required by law [to give away], because there is just such a need, but when you balance that back out with making sure we're doing the right thing for the longevity of the foundation, you have to start cutting back," Warsaw said. "We have to take drastic measures to ensure the integrity of the foundation because nobody else is."
OceanFirst Foundation, in Toms River, is one of the tens of thousands of foundations nationwide that have seen a decrease in its contributions, gifts and grants paid. OceanFirst's giving has fallen from more than $2.6 million in 2006 to just above $1 million in 2010, according to IRS filings.
"Projects that we may have done a few years ago when our resources were a little bit greater, we've had to take a second look at some things, and we've prioritized things like hunger programs, emergency housing, the basic necessities of life and the organizations that we're working with," said Katherine Durante, executive director of Toms River-based OceanFirst Foundation, which was formed and funded with its own freestanding endowment by OceanFirst Bank during the corporation's IPO in 1996. "Where it's been necessary, where there are projects and needs that we want to support, we have sold some stock to ensure that we had the funding that we needed to do those things. It's been a little more challenging, but you can still give in a meaningful way to a lot of charities that are really struggling."
