Scottish grantmakers should consider ‘economic counter-cyclical funding’

Foundations in Scotland made £601m (€696m) of grants in their latest financial year, and hold just under £4bn (€4.6bn) of net funds, according to new research.

The publication also includes 17 recommendations for the Scottish Government, its charity regulator, grantmaking foundations themselves, and the organizations which seek their grants.

The research by the University of St Andrews Business School’s Centre for the Study of Philanthropy and Public Good (CSPPG) identifies 315 charities that mainly distribute funds to other organizations, rather than run services themselves. Around half of the foundations, both in number and in terms of total funds, are based in Scotland’s two largest cities, Edinburgh and Glasgow.

These foundations generated a collective total income of £2.6bn in their last year, a figure significantly larger than the £601m of grants made. However, the researchers warned that it could be a mistake for the Scottish Government to create laws, like those seen in other countries, to force foundations to distribute a certain percentage of their assets each year.

“The modelling suggests importing a similar rule without careful design could backfire,” a CSPPG press release says, noting that it might encourage some to “cut back to the minimum”, reducing the sector’s total outlay.

Other recommendations in the report for the Government include engaging with foundations with low levels of grantmaking, and to develop further regulations for emerging forms of philanthropy, such as donor advised funds (DAFs). Meanwhile, recommendations for the Office of the Scottish Charity Regulator (OSCR) focus on improving the data available on grantmaking foundations and charities to enable better policymaking.

On this point, the project’s lead research Dr Christopher Dougherty says:

“We now have a clearer picture of the scale of foundation wealth in Scotland, but we still lack reliable data on restrictions, investments and grant recipients. Without that, it is very difficult to design evidence-based policy.”

Meanwhile, grantmaking foundations are urged to “consider economic counter-cyclical funding practices, to increase funding when economic conditions are worse to better respond to community needs”, alongside three other recommendations around better engagement with both others in the sector, and local and national government.

Grantseekers are told to “focus on pragmatism in approaching grantmaking foundation”.

Last year, Fundraising Europe highlighted new research showing that there are approximately 175,203 foundations across Europe, with total annual expenditure of €76bn. CSPPG’s data therefore shows that Scotland’s foundation make up just under 1% of that total expenditure, but represent only 0.2% of total foundations.

Picture by Henrik Hjortshøj on Unsplash