Strong charitable foundations will periodically consider their own futures and the rate at which they are spending their funds, a new report recommends.
Strategy and Governance: The Pillars of Strong Foundation Practice is the third publication from the Association of Charitable Foundations’ Stronger Foundations initiative, which was set up in 2017 to help foundations identify and pursue excellent practice.
The latest paper, published yesterday, sets out seven characteristics of excellent foundation practice in the areas of strategy and governance, which include organisations being aware of the external context and their role in the wider ecosystem, publicly articulating their vision, mission and values, and continually strengthening their governance arrangements, including board diversity.
The report, which is based on more than a year of evidence gathering, says strong foundations will both “stick and twist” by pursuing long-term objectives while being agile enough to respond to current needs.
It says that although a small number of foundations are established with a finite period, such as around a major event, the vast majority operate with indefinite timelines and total flexibility over the rate at which they spend their endowments.
“Stronger foundations will periodically review whether they still need to exist and, if so, for how long,” it says.
“It may be highly unlikely for some that they will ever achieve their mission or that their vision will be realised (for example, a world without poverty or access to the arts for all).
“But reviewing their relevance, and society’s need for their existence, is a healthy exercise that can highlight what needs more focus or less attention.”
This exercise might also give rise to discussions about the rate at which a foundation spends its funds, for example whether its endowment should be eroded to supplement income in any given year to meet rising needs or to make the most of an opportunity.
Carol Mack, chief executive of the ACF, said: “Strategy and governance are incredibly important and easy to take for granted. They are at the heart of what makes for an ambitious and effective organisation that maximises its potential for social good.
“For foundations – which frequently have few of the checks and balances that come with the need to raise funds or to deliver services – these are especially important issues.
“A strong strategic and governance framework is vital to clearly set out what the organisation is working towards and how decisions are made, allowing trustees, staff and stakeholders the confidence to know that decisions serve the public benefit the charity is committed to deliver.”