What does grantmaking look like for Colorado’s largest foundations?
A review of a single year’s grantmaking by the largest 100 foundations in Colorado provides a glimpse into typical giving patterns. For the vast majority of foundations, the grantmaking activity reflects a single year during the 2018 to 2020 period based on the most recent IRS Form 990-PF filing available at the time of initial data collection. Specifically, the grant-level review highlights the characteristics of grants based on size, geography (location of grant recipients), and the causes and activities supported.
Grant Size
Based on a year of activity, the state’s largest 100 foundations made 9,881 distinct grants totaling nearly $531 million. The median grant amount of $10,000 fell far below the average grant amount of $53,722 due to the influence of larger grants. Grants ranged from $15 to $27 million with these large foundations awarding nearly 80 grants of $1 million or more during the year reviewed. The median number of reported grants made by these foundations is 36, but ranges from only 1 to a high of 2,248. Twenty-one of the foundations made 100 or more grants during the year. As seen in table 5, 75% of the annual grants made are for amounts of $30,000 or less. The most common grant amount of $5,000 (more than 10% of all grants) is closely followed by grants for $10,000 (nearly 10% of all grants). These grant characteristics provide visibility into the overall activity of the largest foundations, but provide little visibility into the grantmaking patterns of individual foundations.
Foundations determine how to most effectively deploy grants in support of the organization’s mission. For some, this means spreading out the dollars to a wide range of grantees to extend the reach and influence of giving. For others, concentrated giving to a smaller number of trusted recipients is preferred. The Herfindahl–Hirschman Index, or HHI, captures the different grantmaking approaches for each foundation as a measure of concentration of grant activity.[1] A higher HHI value reflects more concentrated grantmaking (meaning a larger share of total grant funds are allocated to a smaller number of recipients). Importantly, the measure describes how a foundation distributes grants but does not suggest that one giving pattern is preferred to another. Indeed, the nature of a foundation’s mission may strongly influence the HHI value. For example, a foundation supporting a single cause or institution may have the maximum HHI value of 1 (reflecting total concentration of giving). Another foundation, like a corporate foundation that matches employees’ charitable contributions, may distribute small amounts to a wide variety of organizations and have a much smaller HHI value.[2]
The following HHI formula, commonly used to measure market share or diversification, sums the squared grant share for each grant given over the year. The grant share represents the amount of a specific grant divided by the total dollar value of grants in fractional form so the resulting measure ranges from 0 to 1.
For Colorado’s largest foundations, grantmaking is relatively dispersed with only a few foundations giving only to a single recipient resulting in HHI values of 1 (see figure 6 for the distribution of HHI values). The foundation at approximately the 95th percentile of HHIs, an HHI of 0.93, gave $2.08 million to only three recipients and one of those grants was for $2 million. So, the high HHI value nearing a value of 1 reflects this concentrated giving approach. The median HHI value is much lower, 0.14 on the 0 to 1 scale, reflecting grants made of various sizes to many recipients. To illustrate, one of the two median foundations made 53 grants worth a combined $2.02 million. The average grant size was $38,105, but one grant totaled $666,545 (33% of giving) and contributed 0.11 (0.33 * 0.33) to the foundation’s total HHI value of 0.14. A foundation with an HHI value of 0.018, roughly at the 5th percentile of the HHI values, gave nearly $5 million across 113 grants with an average of $43,392 and a maximum grant of $250,000. The extremely low HHI value indicates the total funds were spread out fairly evenly across the grantees.
[1] For more information on the use of the HHI as an indicator of the concentration of foundation grantmaking, see: Jung, Jihye (2020). Dimensions of Democratic Accountability of Foundations: Transparency and Grantmaking Openness [Unpublished doctoral dissertation]. University of Colorado at Denver.
[2] Due to inconsistencies in the reported names of grant recipients, the HHI calculations may understate the concentration of grants since some foundations make multiple grants to the same organization over the course of a year.
Payout Rates
Private foundations are required to make minimum annual distributions for charitable purposes. Discretion exists in how the 5 percent payout requirement is fulfilled, or not, over time. While the size and distribution of individual grants from foundations explains the nature of giving, the size and distribution of foundation payout rates reflects how these organizations deploy their assets on an annual basis. After collecting the average 5-year payout rate from the IRS Form 990-PF, the bottom and top 5 foundations based on payout rates are omitted since the outliers make it more difficult to illustrate the distribution of activity. With these omissions, the average 5-year payout rate for these large foundations is 6.86% with a median of 5.24%. Slightly more than half of the foundations experienced average payout rates between 4.5% and 6.0%. As can be seen in figure 7, the distribution of payout rates centers on the 4.7% to 5.4% bin (with 32 foundations) but is right-skewed by the smaller number of foundations with much higher rates. Both the average and median payout rates of the state’s largest foundations exceed the 5% legal requirement.
Grant Geography
Geographically, foundations, foundation wealth, and grantees are concentrated in Colorado’s Front Range cities, although foundation grantmaking benefits recipients throughout the state. The geography of giving reflects two different dimensions important to the public. First, how much of the grantmaking by Colorado’s largest foundations remains, at least initially, in state? Second, how is the grantmaking from foundations initially distributed throughout the state’s communities? Colorado’s foundations generally direct grantmaking to in-state causes. Colorado grantees received more than 77% of grants (7,670 of the grants) and 73% of grant dollars (almost $390 million of the more than $530 million granted). In other words, 73 cents of every dollar of foundation grants initially remained in Colorado. In some cases, a portion of the grants given to Colorado organizations may be spent on out-of-state activities but this finding supports the notion that most foundation grant dollars stay local and benefit the state’s communities.
Digging deeper into Colorado giving by the largest 100 foundations shows that more than half are primarily or almost exclusively making grants to Colorado recipients (represented as the 3rd and 4th quartiles of foundations in figure 8). A quarter of the foundations give to a mix of in-state and out-of-state organizations (the 2nd quartile), while the remaining quarter of foundations focus support on out-of-state groups (the 1st quartile). Note that the balance of in-state and out-of-state giving can vary substantially over time and this activity reflects only a single year’s practice. Grants directed out-of-state most frequently benefit organizations in California (3.15% of grants), New York (2.17%), and Washington, D.C. (1.98%).
The location of a foundation, as well as the source of wealth, often ties directly to the geographic focus of giving activity. For example, the Robert Hoag Rawlings Foundation of Pueblo, Colorado assists “non-profit organizations with projects that are designed to improve the lives of people who reside in The Pueblo Chieftain circulation area” – including 18 counties.[1] Another example of a foundation being closely tied to a place is The Outcalt Foundation based in Alamosa. The foundation carries on businessman Ralph Outcalt’s commitment to the San Luis Valley by directly supporting “the growth and prosperity of the Valley's youth and good-will organizations…through scholarships, grants and community initiatives.”[2]
Overall, though, the recipients of grants cluster in the state’s population centers with Denver, Colorado Springs, Fort Collins, Aurora, and Boulder representing the leading cities (see table 6 for the top 20 Colorado cities receiving grants and figure 9 for a map of grantmaking activity). Grants to organizations and people in Denver and Colorado Springs make up more than 43% of grants and 49% of grant dollars given in the year reviewed. As expected, the giving to Denver organizations is lower than the share of foundation assets based in Denver as many foundations operate statewide. The Anschutz Family Foundation exemplifies a case where a foundation’s location can obscure the geographic focus of grantmaking. Although based in Denver, the foundation reports that 45% of 2021 grants were made to rural areas and 67% outside of the Denver metro area.[3]
During the year of activity reviewed, grants were made to organizations or individuals in 379 different Colorado zip codes. The zip codes receiving more than 100 grants during the reviewed time period include the following presented in table 7:
[1] https://rawlingsfoundation.com/
[2] https://www.outcaltfoundation.org/about.html
[3] https://anschutzfamilyfoundation.org/our-grantmaking/
Grant Focus
Foundation giving in Colorado targets diverse causes and groups. Although the IRS Form 990-PF includes a field to report the “purpose of grant or contribution,” the information provided is typically too general and inconsistent to assist in determining the use of the funds. Moreover, the field captures the intended use of the grant funds, like general operating support, rather than the broader purpose of the group receiving the funds. Some foundations, like Daniels Fund and Buell Foundation, enhance transparency by providing more detailed information on the purposes of grants in the federal reporting.
The purpose of giving in this review refers to the nature of the activity of the grant recipient and was determined using the National Taxonomy of Exempt Entity (NTEE) NTMAJ12 code associated with the grantee organization. In the absence of an NTEE code, the purpose was determined by considering the primary activity of the grant recipient. Governments, in particular, do not have assigned NTEE codes unless accompanied by a nonprofit fundraising entity, so grants to public elementary and secondary schools were considered giving to “Education” and a separate purpose category was created for grants to “General Government.” While NTEE codes are helpful in identifying the purposes of grants, they are imperfect since many organizations have multiple NTEE codes and others have none. Grants may also be given for a purpose that is distinct from the primary purpose of the recipient organization. A common example is a public-school district receiving a grant to promote the health of students. The grant is considered to support “Education” (the purpose of the recipient) even though the specific use of the grant funds is to support health. Similarly, a grant to a university medical center is classified as supporting “Higher Education,” but also could be considered “Hospital” or “Health (other).” For these reasons, the grant purposes reported here should be thought of as only general approximations of where foundation resources are being directed. Figure 10 presents the number of grants made by purpose.
Based on the review of the nearly 10,000 grants, human services organizations received the most support based on the number of grants received (30% of grants), followed distantly by education (15%), public and societal benefit (13%), higher education (9%), health (9%), and arts, culture, and humanities (8%) organizations.
Examining the amount of giving tells a somewhat different story with giving primarily directed to higher education (24% of grant dollars), human services (18%), education (14%), public and societal benefit (12%), health (12%), and arts and culture (6%) organizations (see figure 11). The share of grant dollars directed to “Higher Education” drops from 23.8% to 18.8% when a $27 million gift to the University of Colorado Foundation is excluded. This is further evidence of the difficulty of extrapolating foundations’ giving patterns based on a single-year’s giving.
Foundations spread support across a wide range of purposes and the giving generates both social and economic benefits.