UK foundations increase giving despite drop in donations

The UK's largest charitable foundations increased their giving by 10% over the 18 months to March 2013, according to the Association of Charitable Foundations (ACF), despite falling public and corporate donations.

Foundation Giving Trends found charitable giving by foundations grew by £271 million to £2.4 billion, accounting for 14% of total private charitable giving, while income fell by approximately the same amount.

The report said voluntary donations to foundations by individuals and corporations fell sharply in the wake of the 2008 financial crisis, and still have not returned to pre-crisis levels due to continuing slow economic growth.

The ACF described the fact that foundations are increasing giving while donations are falling as "unprecedented", but attributed the change to the fact more foundations are adopting the total returns approach to managing their finances.

It allows foundations to count capital returns as income, and spend the equivalent amount in liquid assets, rather than just counting dividends, interest and capital gains as income. 

This allows foundations to spend money that would have otherwise been considered part of the original, permanent endowment, which ordinarily they would have been obliged to keep invested under the foundation's charter. 

Foundations have to amend the rules of their investment strategies if they want to adopt this approach, but the recent amendments to the Trust Act makes it easier for them to do this. Previously, foundations had to have approval from the Charity Commission before they could adopt the total returns method. 

Foundations saw higher returns on their investments between 2011 and 2013, accounting for 42% of total income, compared to 37.4% between 2010 and 2012.

The research also found the UK's top 20 foundations account for more than half of all foundation giving, and the top 300 account for 90%. 

The Wellcome Trust, which focuses on medical research, topped the list, making endowments of £511 million in 2012.

The research is the first in a series of planned annual reports to track the value of grants from the UK's top 300 foundations over the previous six years.