If we are to satisfy our organizational mission, this total return investment strategy must be complemented by what is commonly known as a spending policy.  A spending policy is a cash usage, or “spending” determination, made each year by the Board of Directors aimed at satisfying two complementary goals:

1)  To ensure, over time, that the growth of each fund’s principal assets meets or exceeds the annual advance in the Consumer Price Index.  As a result, grant distributions from each fund to charity ten years from now will have the same purchasing power as today’s grants.

2)  To maximize grant dollars to address community needs.  The Pittsburgh Foundation’s spending policy is reassessed annually by the Board of Directors.  The practical application of the spending policy results in a Grant Making Budget for each fund.  Through membership in our professional association, the Council on Foundations, we maintain contact with philanthropic organizations of all sizes located throughout the nation in order to be attentive to the latest findings about successful endowment fund management.

How it is applied

Depending on the fund type, the spending policy rate ranges from 4 to 4.5 percent of a rolling 12 quarter average of the principal market value of each fund.  Each September 30th, the Grant Making Budget for every fund is calculated for the following year. 

Accordingly, donors can, but are not required to suggest grants out of this amount in the following year, plus any unspent dollars from the current year.  Additionally, donors whose funds allow for invasion of principal are not limited to the spending policy amount.