Making Allowances for Fluctuating Endowment Value

After we had been in business for three years, we wondered how to make grant budgets when the size of the asset base might change—even drastically—from year to year. We wanted some predictability to our grant budget. Our investment manager suggested that when we set our annual grants and administration budget, we use the average value of the preceding 12 quarters. This kind of calculation tends to dampen the yearly swings of a small foundation’s asset value. The 12-preceding-quarter method of asset valuation assures that in both good times and not-so-good times, we will have a predictable level of grantmaking.