Foundation Operations: Grantmaking-> Funding Strategies-> Multiyear Funding
We are considering requests for multiyear funding. How much of our grants budget can we commit in the future?
Every foundation that provides long-term funding approaches this differently. Many factors can influence how a grant agreement and payment schedule are structured, including: The type of relationship the foundation wants with the grantee -- is the foundation looking to build a partnership; provide operational support; create impact; fill a gap in services? The foundation's finances -- how might assets be affected by investments and market forces; should future funds be tied up; is the request being made at the end of the fiscal year when there is a budget surplus; could the award decrease level of support for other grantees? How the foundation is perceived -- how reliant should grantees be on this funding source; is the foundation able to fund other organizations; what is the long-term relationship of the foundation to its community? Here are three approaches:
- At a health foundation with assets greater than $250 million, the practice is to spread payments for a three-year grant 60 percent in year one, 30 percent in year two, and 10 percent in year three. For programmatic reasons or needs, a grant may sometimes be paid in full upfront. Or, if public support issues are present, payments may be spread evenly over the period, dividing the grant amount by three, for a three-year grant.
At another foundation, the trustees ask that they go into a new year with no more than 20 percent of their grants budget committed.
The third foundation doesn't have a formal policy, but tries to be very thoughtful when making multiyear commitments and generally starts a year with about 30 percent of the grants budget committed.