You can’t harvest money from a tree, however it can be reused. iStock by Getty Images Plus, credited to siraanamwong. Many U.S. foundations endeavor to protect the finances that finance their awards and activities for a lengthy period. These foundations ensure they remain financially secure by not spending more money than they gain through returns on the items held in their endowments. According to the regulations, foundations must expend or donate a minimum of 5% of the endowment each year. Foundations typically spend a greater amount that what is simply handed out in grants, taking into account overall total expenses as well. For example, in 2018, they expended roughly 8% of all held assets. To ensure that they make the most of their charitable funds, foundations can utilize program-related investments, a type of lending that serves philanthropic interests. Rather than providing money free of charge, the money is usually paid back within a few years. This structure allows foundations to make use of their philanthropic money multiple times. The investments can make up the required 5% disbursement amount, and the Internal Revenue Service (IRS) has stated they must be used to meaningfully advance the foundation’s charitable goals. This implies that the funds a foundation allocates to its programs, similar to the money it donates as grants, must advance its foremost philanthropic aspirations.
