Charitable foundations should give mandatory 5 per cent of total funds

Finance | Gareth Jones | 26 Nov 2009

Charitable foundations are “underutilised” and should be required by law to spend at least 5 per cent of their total endowment each year, according to a report by Cass Business School.

It argues that in light of the recession, a formal distribution quota would be “good practice” and could increase the charitable funding of endowed foundations by 31.5 per cent or around £1bn per annum.

The report also argues that a wider variety of umbrella charities with donor advised funds should be set up with government seed funding.

It adds: “Some of these could be linked to charity sub-sectors such as the arts or international development and a possible incentive for the creation of donor advised funds would be the introduction of an enhanced tax incentive for donations.”

"Critical assessment"

The report, which was prepared by the School’s Centre for Charity Effectiveness on behalf of the Honorary Treasurers Forum, claims to be “the first critical assessment of the role of UK foundations which also takes the impact of the credit crisis into full consideration”.

It was co-authored by Peter Grant, lecturer in voluntary sector management at Cass (pictured).

Bruce Gordon, chair of the Honorary Treasurers Forum, said: “Within the sector, foundations should report on the added value of their grant giving and ensure that their governance and grant making procedures are appropriately managed, both in the context of public benefit and interest.

“They must also urgently review their current commitments and policies to ensure their funding models are impact based and take into account the life cycle of the recipients of their funds.”

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Directory: Cass Business School

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