A recent comment on my foundation giving post asked for some more detail. One observation was that some foundations use a rolling average over 3-years to determine grants budgets, so reductions in grants budgets may not be as serious as the market decline.

That observation opens up another dimension of the discussion that my original post ignored. The 3-year rolling average approach applies more to endowment management than private foundations. For example, community foundations often use this approach as a way to relate their assets to their grants. As public charities, community foundations are not subject to the 5% payout rule that governs private foundations.

Our region is blessed with several community foundations and other public foundations. And those that use a multi-year rolling average approach will see less of an impact on their giving budgets.

A private foundation's minimum distribution is tied to its annual asset value. An organization may use a multi-year rolling average to informally figure a giving budget, which can soften declines. But a private foundation using that approach to inform its decision making will likely have to adjust the formula in an up market. A multi-year rolling average will also lessen the increases in an up market.

The other point from my original post that I've heard more about is the impact of long-term commitments. In either case, a public foundation using a multi-year rolling average or a private foundation tied to 5% of its annual asset value, you are talking about the process of determining a giving budget.

As a grant seeker, you have to be concerned about how much of that grant budget is actually available for giving in the coming year. And that amount may be affected by long-term commitments that funders have made over the past several years when the stock market was up.

Finally, grants are only a part of the picture. The best thing your organization can do to weather this uncertain economy is to look at all its sources of revenue and support. Take, for example, sponsorship of arts events. Financial firms have been a key resource for arts sponsorships. How much impact will recent events have on your organization or on the arts sector? Similarly, fee for service revenue, whether for a health care appointment or a theater ticket may suffer in the coming year. What affect might that have on your organization?

It's time to sharpen a few pencils and go through budgets line by line.

You can email me at kenristine@hotmail.com or post a comment below.