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Duke Endowment tweaks grants strategy

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The Duke Endowment

The Duke Endowment

Ret Boney

CHARLOTTE, N.C. – After absorbing a drop in assets of more than $1 billion during the market downturn, a slide that has dampened grants to nonprofits, The Duke Endowment is changing the way it develops its grantmaking budget.

Until recently, the Charlotte-based funder awarded grants in a given year that totaled 5.5 percent of the value of its assets over the prior 12 months.

So when the stock markets crashed, sending the endowment’s assets to a low of $2.2 billion in early 2009 from a high of $3.3 billion in 2007, the organization’s grantmaking fell by almost $66 million.

In response, the foundation’s education and child-care divisions suspended new grantmaking.

But with assets back up to about $2.8 billion, grantmaking for those divisions, and for the health-care and rural-churches divisions, is up and running again, says Gene Cochrane, the foundation’s president.

And the child-care and rural-churches divisions are in their last difficult year as they finish honoring some longer-term commitments.

The goal now is to change the way the endowment develops it grants budget so that future stock-market downturns won’t have such a dramatic effect on the organization’s grantees.

To do that, the endowment has increased from a 12-month rolling average of its assets to a 30-month rolling average, and likely will continue the trend to reach 36 months, or even more, says Cochrane.

“If we’d had a longer period in that calculation, our drop would have been much more of a slope,” he says. “It’s nice when the market’s going up, but it’s really painful when it’s going down.”

Keeping grantmaking steady and predictable for grantees is important, particularly when the full effects of the recession continue to weigh heavily on nonprofits and the communities and cause they support.

Demand is down for day-care services at rural churches the endowment supports, for example, in large part because local parents are out of work and therefore able stay home with their children.

And with hundreds of teacher layoffs planned by Charlotte-Mecklenburg Schools, and likely more layoffs at parks and recreational facilities, the pain felt across the state is likely to worsen, says Cochrane.

“I think the public sector certainly has lagged in employment layoffs,” he says. “But it’s getting hit now.”

In an effort to meet those community needs, the endowment aims to leverage its dollars, and its impact, by increasing its reliance on intermediary organizations, says Cochrane.

Rather than making grants to an array of nonprofits dealing with the same problem, the endowment is considering putting more dollars into organizations with a very tight focus that provide expertise to a host of other organizations.

“It may be a shift away from individual organizations to entities we think can help more broadly,” says Cochrane.

Rather than funding individual hospitals directly in its effort to improve quality of care and lower the incidence of medical mistakes, for example, the endowment is working with the North Carolina Center for Quality and Patient Safety, which in turn provides technical assistance and data analysis to hospitals statewide.

And the endowment is funding North Carolina Prevention Partners in its efforts to help hospital employees eat healthier and make hospital campuses tobacco free.

“A specialty organization that is very focused can provide a lot of expertise and share lessons better than you can by funding individuals organizations,” says Cochrane. “Otherwise, it’s hard to transfer what you know from one organization to the other.”

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