Technically a revised and expanded edition of their previous work Creating a Private Foundation (2003), the new publication Managing Foundations and Charitable Trusts by Roger Silk and James Lintott now takes into account recent challenges facing philanthropists in the current economic downturn.
Primarily written for those contemplating creating a new foundation or who already have a foundation, charitable trust, or other charitable entity, Managing Foundations covers the basics of charitable giving, the business of philanthropy, and provides descriptions of various planned giving vehicles. It also gets into the nuts and bolts of investing and asset allocation, donor-advised funds, and Charitable Remainder Trusts (CRTs).
There is much here for the general reader as well. The Bernard Madoff scandal was for many the symbol of everything that went wrong financially in late 2008, and it had a large impact on foundations, jeopardizing the investments of at least 23 charities. In the chapter “Fraud, Inflation, and Market Risk” the origins of his Ponzi scheme are explained in detail, revealing that Madoff may have “strategically targeted private foundations because of the 5% payout rule.” Since many foundations adhere to the rule (spending at least 5% of assets every year) Madoff would only need a fraction of their assets on hand for withdrawals. This helped sustain the Ponzi scheme even longer than otherwise possible. The authors state that the scheme served as a cruel reminder that investors “need to concern themselves not merely with issues of return on capital, but more fundamentally with the issue of return of capital.”
Another chapter covers unintended consequences of charity, or “The Road to Hell.” Starting with an explanation of how well-intention government programs (i.e. sustainable biofuels) can lead to adverse results (increased starvation of the world’s poorest people) the book lays out how the same can happen to private charitable giving. For instance, some felt that the Bill & Melinda Gates Foundation's AIDS program in Africa had the unintended consequence of leaving gaps in the supply of services for non-AIDS medical issues. How can this be avoided? One suggestion is that philanthropists focus more on programs that alleviate poverty, instead of on the conditions/manifestations of poverty such as preventable disease.
So, while intended for donors and philanthropic advisors, Managing Foundations can also serve as guide for grantseekers who want to know more about the motivations, concerns, and challenges of grantmakers in times of financial instability. It’s also hopeful. The authors are quick to point out in the preface that despite the stalling economy charitable giving is actually higher than it was ten years ago and thriving.
Managing Foundations and Charitable Trusts is available at the Foundation Center's New York, DC, San Francisco and Atlanta libraries under call number 514 SIL MAN.
The Foundation Center--New York
Here is a Google Books preview: