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The future of competitive grant making, in both public and private spheres, is of considerable interest to grant seekers and to those who work with and for them.

 

This post explores three trends impacting the future of private grant making: discretionary decline, asset attrition, and social entrepreneurship. Its purpose is descriptive, not normative. Arguably, although the trends’ context is American, their scope and consequences are potentially global.

 

Discretionary Decline:

The Foundation Center reports that all foundations based in the United States are forecast to have awarded a total of perhaps $48.4 billion in grants during calendar year 2012 – an increase of as much as 3% over 2011. By contrast, the Office of Management and Budget (OMB) forecasts the Federal government to have awarded $159.53 billion (estimated) in discretionary grants to state and local units of government during fiscal year (FY) 2012 – a year-to-year decrease of $47 billion (or 23%) over FY2011.

 

The reduction in Federal grant making in the United States nearly equals the forecast total of all foundation grant making there. Most of the Federal decline ($32 billion, or 68%, of it) is expected to occur in discretionary grants for education, training, employment and social services. Private grant making is unlikely ever to make up anything near the amounts involved.

 

Beyond funding forecasts, other trends during the 2010s are also impacting the private grant making. Among them are asset attrition and social entrepreneurship.

 

Asset Attrition:

Study any 990-PF filing and one can see how much private foundations depend upon returns on stock investments to sustain their capacity to make grants each year. As measured using the Dow Jones Industrial Average, in August 2012, the stock market was performing at the same level (at 13,000 points ±), as it was four and a half years earlier. It takes some time before a foundation translates the values recovered in its investment portfolio into more or larger grant awards. Meanwhile, during the same 54-month period an annual rate of inflation change of 6.4% is likely to have eroded the real value of its investments.

 

Social Entrepreneurship:

A recent empirical study by EIM and the Dutch Ministry of Economic Affairs explored social entrepreneurship as an enduring trend in economic development. It found that social entrepreneurs tend: to be mission-driven in seeking to deliver a social value to the underserved; to act entrepreneurially; to act within entrepreneurially-oriented organizations that value innovation and openness; and to act within financially independent organizations that plan and execute earned-income strategies. Their objective is to deliver an intended social value while remaining financially self-sufficient. Among their goals in blending social and profit-oriented activities is that of reducing beneficiaries’ reliance on donations and government funding.

 

A later post will explore three more trends impacting the future of private grant making: grants as investments, social media, and product-driven support.

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