Writing on his blog at the Nonprofit Quarterly, Rick Cohen says the nonprofit world needs a new way to measure foundations and their grant making.
“Our understanding of foundations is faulty, because we lump all different kinds of foundations together in our analysis of their grant making and spending practices, like a ball of string or rubber bands,” he says.
Mr. Cohen says the nonprofit world suffers from “misplaced aggregation.” For example, foundations that are spending all their assets in a set time, and those led by living donors who tend to give more, are calculated together with traditional foundations that rarely give above legally required annual payment of 5 percent of assets per year.
That means statistics like one calculated by the Foundation Center, which says “independent foundations” distributed 6.1 percent of assets last year, makes foundations look more generous than they are.
Mr. Cohen says that foundations use “misplaced aggregation” not only to defend themselves from pressure to give more, but also against regulation that they think would prevent them from hiring additional employees.
He says that foundations argue that, on average, they employ very few people. But a tiny number of large foundations account for most of the staff members, Mr. Cohen, says, skewing the averages well above the medians.
“Until we get to compare apples to apples—that is, endowed foundations to endowed foundations, culling out the unendowed and spend-down foundations that make foundation pay outs artificially higher—we will never be able to understand them, much less advocate about and regulate foundations appropriately and accurately,” he concludes.
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