Spending policy is a formula that determines the annual charitable payout from the Foundation’s funds.  The setting of a proscribed spending rate moderates annual fluctuations in market returns.  Through an enforced, conservative evaluation of fund assets, the setting of the spending rate restrains spending in productive years in order to enable spending in lean years.  It also allows for a portion of returns to be reinvested to counter erosive effects of inflation and maintain the fund’s real market value.  The spending rate is based on a rolling average of trailing market value, which smoothes market volatility and allows for more stable and predictable spending amounts.  Typically, the Board of Directors designates a spending policy between 4% and 5% of average fair market value.

Donors can be assured that funds are being managed in an effective manner that balances current demands and future needs.  Investment management will include long-term strategies not subject to sudden shifts in interest rates or market value.  Also, investment strategy will not be forced to focus on required distributions from dividends and interest alone.  For organizations that count on grants from our funds, this policy helps them to gauge their income for future planning purposes.