Using Spending Policy to Create a Giving Budget
One of the most common questions donor-advised fundholders ask is: How much should I give? While philanthropy is driven by passion and purpose, effective grantmaking also benefits from a clear plan. The Community Foundation’s spending policy offers a helpful framework for creating an annual grantmaking budget that is both impactful and sustainable. And voluntarily adhering to that spending rate is a tool for donor-advised fundholders who want their fund to last for a long time.
What Is the Foundation’s Spending Policy?
Community foundations design spending policies to ensure the long-term viability of their endowments. Each year we determine how much we can spend from our endowed funds by calculating the average balance of a fund over the past 20 quarters of time. Then, our annual spending rate — which is typically 4-5 percent — is applied to that average. This prevents overspending in periods when the market is up or underspending when the market is down.
For donor-advised fundholders, following this spending policy is not a requirement unless it was mandated in the fund agreement or succession plan. But it is a trusted guideline that provides a more stable, predictable basis for planning.
How the Spending Policy Helps with Budgeting
- Creates a Clear Starting Point: Following our spending policy allows you to estimate the amount available for grantmaking from your fund from year to year. This removes uncertainty and makes it easier to plan your giving in advance rather than responding to requests as they arise.
- Minimizes the Impact of Market Volatility: Because the policy is based on a five-year average, it helps smooth out short-term market fluctuations. This allows you to stay focused on your charitable goals rather than reacting to annual investment performance.
- Supports Sustainable Giving: Following spending policy helps balance generosity today with the ability to give in the future. It reduces the risk of unintentionally spending too much too quickly, or holding back out of concern about long-term impact.
- Encourages Strategic Decisions: With an estimated grantmaking budget in mind, you can be more intentional about how you give. Fundholders often use this tool to decide how much to allocate to long-standing nonprofit partners, new opportunities, multi-year commitments or responsive grants for emerging community needs.
Flexibility Within the Framework
The spending policy is a guide, not a limit. Some years may call for more or less giving based on personal circumstances or urgent community needs. The policy simply provides a thoughtful baseline for planning and conversation.
The Philanthropic Services team is available to help you apply the spending policy to your donor-advised fund and develop a grantmaking plan that aligns with your values and philanthropic goals.
Contact us to learn more: donorsupport@cnycf.org or 315.422.9538 (ext.1)
