December 2004
Where does foundations' income come from?
Foundations income sources range from the traditional endowment scheme...
Most foundations derive their income from an endowment, i.e. a capital sum given to them by a individual, family, company or another organisations and in some cases a governmental institutions. This endowment can take the form of movable property - e.g. cash, shares, bonds, work of arts, author rights, research licenses or immovable property - real estate, land. The endowment provides an income - which benefits from tax-exemptions/deduction in most EU countries- and enable the foundation to carry out its activities, giving grants to third parties and/or operating its own programmes.
...to a multiplicity of other revenues:
An increasing number of foundations across Europe receive their income from various sources, sometimes in addition to their initial endowment. These can include the following:
- bequests and gifts from individuals, gifts from companies on an ad hoc or regular basis
- regular appeals to public generosity
- self-generated income through the provision of services and goods
- public procurement - public contracts from national, regional, local public authorities
- gambling or lottery proceeds
- other donors. Some foundations can also act as brokers for other donors and thus collect and pool funds to benefit a community/locality, - this is the case for community foundations - or to benefit a specific field
- contributions from religious bodies.
The John Hopkins University's Comparative Nonprofit Sector Project provides data on the income of the wider non-profit sector (public money, private giving and fees & charges) with and without volunteer input) in some 35 countries , including 15 European countries. Yet little information is published about the foundation sector yet.
How do foundations invest their assets/income?
The preliminary findings of the EFC Research Task Force on the dimensions of the foundation sector in the EU set out that foundations' assets across 8 EU countries total some EUR 172 billion assets . Although the amount is quite significant, little is known on how foundations invest these assets across Europe in a comparative perspective. Some research has been undertaken in some countries but tend to focus on charities / voluntary organisations, whether they look at investment management trends and practices (pooled funds, alternative and ethical investments) or relate to training and capacity building materials on how to go about it. Some "technical" material can also be found at country-level for the use of foundations on how to build an endowment. Such resources have been developed in particular for community foundations.
It seems however that they is a growing interest from foundations and external parties in the field.
In 1999 the EFC organised a first meeting for interested members on the impact of the introduction of Euro on investment policies of endowed foundations. This initiated a new format of meetings looking at investment practice of foundations with the setting up of the European Foundation Financial and Investment Officers (EFFIO) group in 2002. The latter aims to provide a platform, where its members can exchange views, ideas and information on investment issues from a European perspective.
Other foundations ' groupings e.g. the Bellagio Forum for Sustainable Development, the EFC Social Investment Interest Group and private firms have engaged in the field.
> go to Research on foundations' income and investment practices
> go to Foundation's income and investment practices - bibliography