Explaining The Rotary Foundation (part 1)

Screen shot 2015-02-08 at 2.51.49 PM• Although Rotary International has numerous programs and services easily communicated ti most people, The Rotary Foundation (TRF) for some reason often is not well understood. To help alleviate that problem. RI has created a series of three articles of explanation This is the first.

by Quentin Wodon
Rotary International

The Rotary Foundation (TRF) of Rotary International is a major player in the work of Rotarians worldwide. True, most activities organized by clubs and indeed most service projects are implemented independently of the Rotary Foundation. Many clubs have their own foundations and many projects do not require a foundation to be implemented. But, for most investments at scale, TRF does play a key role, so Rotarians should have at least a basic knowledge of the foundation.

My guess is that this is not the case today, so I thought it might be useful to run a three-post series on some of the basics of the foundation. This first post discusses assets and expenses. The next will look at categories of expenses by thematic areas. The third will discuss management and suggest a few ideas to make TRF more impactful.

How large is TRF In Terms of Assets?

A widely-used measure of the size of a foundation is its assets. According to their latest annual report (consolidated statements of activities), TRF and Rotary International had $1.2 billion in total assets as of the end the 2013-14 fiscal year, and $1.09 billion in assets net of liabilities. This represented an increase in net assets of about $130 million versus the previous year (2012-13) when net assets were at $961 million and total assets were at $1.08 billion.

One billion dollars is no small change, but some other foundations are even larger. Within the United States, TRF would rank about 71st in terms of assets according to data from the Foundation Center. (For some reason, TRF is not listed in the top 100 foundations put together by the Foundation Center, so the exact ranking is not available). The largest U.S. foundation is the Bill and Melinda Gates Foundation, which had more than $40 billion in assets at the end of 2013. A dozen other U.S. foundations have assets between $5 billion and $15 billion, and many more had assets between $1 billion and $5 billion.

In other words, in comparison to some of the largest U.S. foundations, TRF could be considered as mid-size, even if it remains large in comparison to most. In comparison to foundations from other service club organizations, TRF also is  the largest, by far. Lions Clubs International now has more members than Rotary worldwide, but the Lions Clubs International Foundation had total assets in 2014 of $318 million. This is still large, but quite a bit smaller than TRF. The Kiwanis International Foundation is much smaller in terms of assets ($28 million in 2013).

How large is TRF In Terms of Grants?

Grants matter more than assets, because this is where the foundations make a difference. In 2013-14, TRF has total expenses of $350 million. About two-thirds of that amount ($232 million) were allocated to program expenses. The rest went to TRF development expenses ($16 million), TRF general administration ($5 billion), RI operating expenses ($73 million) and RI service and other activities ($25 million).

With $232 million in program giving last year, TRF would have ranked about 25th among U.S. foundations, according to the list from the Foundation Center. This is a pretty good ranking. By comparison, the Lions Clubs International Foundation provided $44 million in grants in 2014, and the Kiwanis International Foundation made $18 million in grants in 2013. Only one U.S. foundation — the aforementioned Gates organization — gives more than $1 billion dollar in grants per year;  it gives more than $3 billion per year.

Why is there such a jump in terms of ranking for TRF among U.S. foundations when considering grants or contributions instead of assets? In large part because many U.S. foundations rely mostly or quasi exclusively on their endowments to make grants, without necessarily a lot of extra funding coming in annually apart from returns on equity. By contrast, TRF also is able to rely on donations from Rotarians, among others through its annual fund. In 2013-14, revenues from the annual fund reached $117 million. A separate endowment fund grew by $24 million. Annual giving by Rotarians, which is invested by the Foundation, is what makes it feasible for TRF to be able to make more grants in a sustainable and long-term basis.

Still, we should all realize that, while substantial, $232 million in grants/contributions per year remains small in comparison to some of the investments made by other players in the field of development. Official Development Assistance flows estimated by the Organization for Economic Cooperation and Development stood at $134.5 billion in 2013. The largest recipient was Afghanistan, with more than $5 billion in aid. And, some groups such as World Vision or Catholic Charities tend to have larger footprints than TRF. For example, World Vision provides funding to the tune of $2.3 billion per year for international programming as well as relief and rehabilitation, or about 10 times the level of contributions of TRF.

Who Gives the Most to TRF?

Since annual contributions are essential for the future of TRF, it is useful to look at who gives. The country that gives the most to TRF is the U.S. This is not surprising because the U.S. also has the largest membership in Rotary.

For the Rotary year 2013-14, TRF received $174 million from donors in the U.S. This includes $90 million in matches for polio programs from the Gates Foundation, so individual and other forms of giving reached $84 million. Japan came in second with $15 million in giving, followed by India with $13 million, Korea with $12 million, Taiwan with $9 million, Italy with $8 million, Canada and Germany with about $7 million each, and Brazil with $5 million.

How about giving per member? On a per-Rotarian basis Taiwan comes out on top with $216, followed by Korea at $182, Canada at $168, Japan at $134, the U.S. at $124, not including the Gates Foundation matches, and Australia  at $123. In other countries, average giving per Rotarian to TRF is below $100 per year.

Considering that membership in Rotary costs much more than that, including for meals in many clubs, these levels of individual giving are, frankly, too low, especially in the United States where donors benefit from a tax exemption when giving since TRF is a registered 501c(3) charity. But, this is another matter that will not be discussed here.

NEXT: In comparison to overall flows for projects in developing countries, TRF is not at the same level as a number of other players, which makes the issue of strategic positioning essential for the foundation. That will be the topic of the next post in this series.


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