Prudent Stewards or Pyramid Builders? Distribution Policies of Private Foundations

Tuck School of Business Working Paper No. 02-18

30 Pages Posted: 14 Sep 2002

See all articles by Richard C. Sansing

Richard C. Sansing

Tuck School of Business at Dartmouth

Robert J. Yetman

University of California, Davis - Graduate School of Management

Date Written: September 6, 2002

Abstract

The non-profit sector in the United States owns investment assets of about $1 trillion. Nearly half of these assets are owned by private foundations. The tax law requires that private foundations spend at least five percent of their assets each year on charitable purposes. Despite this minimum distribution requirement, private foundations doubled in size between 1994 and 1998. This paper examines the distributions made by a sample of private foundations between 1994 and 1998 using actual tax return data. It examines the amount and timeliness of these distributions. It also examines the level of administrative expenses per dollar of grants. It finds substantial variation among foundations with respect to each measure. It also finds that the tendency for a foundation to minimize the amounts currently transferred to charitable beneficiaries is positively correlated with size, fraction of operating expenses paid to outside experts, fraction of operating expenses paid to foundation officers, directors, and trustees, and is negatively associated with the fraction of current revenues from new contributions.

Keywords: Private Foundations, Non-profit Organizations, Payout, Minimum Distribution Requirement

JEL Classification: L31

Suggested Citation

Sansing, Richard C. and Yetman, Robert, Prudent Stewards or Pyramid Builders? Distribution Policies of Private Foundations (September 6, 2002). Tuck School of Business Working Paper No. 02-18, Available at SSRN: https://ssrn.com/abstract=329161 or http://dx.doi.org/10.2139/ssrn.329161

Richard C. Sansing (Contact Author)

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0392 (Phone)
603-646-1308 (Fax)

Robert Yetman

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
282
Abstract Views
2,347
Rank
196,206
PlumX Metrics