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What determines the Luce Foundation’s targets for payout and new grants?

Adhering to the Internal Revenue Service (IRS) requirements, the Luce Foundation each year distributes five percent of the value of its assets. Some foundations and endowments use three-year or twelve-quarter rolling averages of asset-valuation to determine the level of their distribution. For the past eight years, the Luce Foundation has used a current-year formula, basing its payout on the average of the asset-valuation for the 12 months of the calendar year. As the IRS allows, the Luce Foundation counts administrative expenses toward the payout requirement, but maintains a voluntary cap of 15 percent on those expenditures.

Most grants are paid on a multi-year basis. Each fall, the Luce Foundation’s board tallies its commitments for the coming year, estimates the average asset-valuation, and then sets targets for the approval of new grants. During the year, those targets are reviewed and modified if market conditions change.

Can you say more about how the Luce Foundation makes decisions about new grants?

Prospective grantees often begin the process with an email or phone call to the director of the appropriate program. Before inviting a full proposal, the program director usually asks for a brief inquiry-letter, outlining the organization’s project and goals. This allows the program director to assess whether the proposed activity is a good fit for the Foundation’s mission and the program’s priorities, and also whether the needed funding is within the Foundation’s capacity. Further conversation and evaluation follow during the development of a proposal. When the proposal and all supporting materials have been submitted, the program director makes a recommendation first to the president and then to the board of directors, which takes action on all grants larger than $50,000.

In competitive programs (like the American Art program’s annual exhibition grants), the program directors are assisted by panels of outside experts. In the Clare Boothe Luce program, decisions about new grants are made by a selection committee jointly appointed by the Luce and Heritage foundations, rather than by the Luce Foundation’s board. For grants under $50,000, the president approves new awards upon the program director’s recommendation and reports the approval to the board chair.

Does the Luce Foundation fund indirect costs (overhead)?

As a general rule, we prefer to fund only direct project costs, which may include general administrative costs directly related to the grant-funded project (e.g., percentages of support staff salaries, office supplies, rent, etc. that can be clearly attributed to the funded project). Paying indirect costs (or institutional overhead) subtracts from our ability to support a project, and we do not increase grants to cover such costs. Program directors determine on a case-by-case basis whether indirect costs will be allowed and at what rate. If indirect costs are allowed, the maximum is typically 10 percent.

Where can I learn more about other foundations?

One very helpful source is The Foundation Center, an independent national organization that provides authoritative information on foundation and corporate giving. The Center's website has general information about funding and links to other foundation websites.



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