By Nicole Sykes and Taran Uppal

Behind many great charities stand many great trusts and foundations, bringing financial firepower, connections, challenge, skills and support. From behemoths distributing tens of millions of pounds each year, to the small foundations set up in memory of loved ones - funding specific causes like postgraduates at a particular university or church organs in a particular county – trusts and foundations play a vital role in the charity sector landscape.   

On a purely financial level, trusts and foundations are significant. Charities are estimated to have received around £4 billion in grants from charity sector grant-making trusts and foundations (GMTFs) in 2019-20, alongside £500 million from the National Lottery and £1.3bn in grants from the private sector. The largest 300 foundations alone are estimated to hold £87.3bn in assets. 

The overwhelming majority of these trusts and foundations take the responsibility of distributing funds to good causes incredibly seriously. There is a seemingly growing community of foundation staff and trustees dedicated to continually improving their funding and investment practices, becoming more transparent and connected to their communities, and adopting best practices in governance, impact, diversity and inclusion. 

But what about those foundations which aren’t doing all they can to put their money to good use? Given the world of polycrisis that we appear to be existing in, can we afford for any charitable money to fail to pull its weight? 

It’s not easy to delve into the quality of foundations’ activities – though there are efforts to do so – so Pro Bono Economics (PBE) has taken a look at the quantity of foundations’ activities. Having identified in the region of 2,000 GMTFs on the Charity Commission register, we have examined their levels of reported charitable expenditure and net asset levels over a five-year period – from 2016 to 2020. Previous estimates would suggest this accounts for between a quarter and a fifth of all foundations registered in England and Wales. Overall, 12% of the 2,000 organisations we identified did not report their assets every year, and so were excluded from the analysis.  

Even within this sample, we identified around 130 organisations that distributed less than 3% of their net assets on average over that period. If just these organisations raised their charitable expenditure levels to 3% of their net assets, it would generate an extra £300mn for good causes each year. 

Much of this additional money would flow from family foundations. Examining a higher spending threshold, family foundations were twice as likely than corporate foundations to have never spent over 5% of their assets over the five-year period. Corporate foundations are structured very differently from family foundations, and many receive a particular grant from a company that they are expected to largely spend. However, family foundations were also substantially more likely than other foundation types to be spending at these lower levels.  


There are numerous reasons why family foundations might be spending a smaller proportion of their assets, from a lack of professional support, to splits between siblings. But at the root of low spending rates by any foundation is a lack of accountability. In the first instance, these organisations are hard to findthey’re the hidden dragons of the charity sector. There is currently no means by which to simply isolate them in Charity Commission data and those with the least activity have the lowest reporting requirements. Even if they are found, the Charity Commission has few powers and even fewer resources to do anything about them. Unlike the US and Canada, the UK doesn’t require any minimum level of expenditure by its foundations. The programmes which do exist to encourage foundations to do more only focus on inactive or almost-inactive organisations. 

Any change to the requirements on foundations would have to be proportionate and managed carefully to avoid creative accounting becoming the main consequence, to ensure that new foundations have sufficient time to find their feet and to avoid disincentivising foundations from making large gifts. 

But without any change, a charitable foundation with assets of over $500mn can accumulate capital appreciation of $73mn in a year, yet only make grants of $9mn. A foundation with £500mn in assets can spend £3mn managing those assets and only £2mn in grants to charities. And a foundation with £1.5mn in assets can make grants of just £5,600 in a year. All of these are real examples from foundation accounts submitted in the last reporting year - drawn from the list of consistently low-spending foundations. Meanwhile, much of the charity sector has been reeling from the pandemic, struggling with the cost of living crisis and wondering how to prepare for what comes next. 

Is it right that foundations are able to sit on funds indefinitely and in perpetuity, with the same level of accountability as a rabbit sanctuary, or a community fridge? Given the scale of challenges our society faces, it’s right to ask whether all trusts can be taken on trust. 

With thanks to Jamie O’Halloran for his original analysis.