Toward more foundation transparency

We’ve all seen it before: A major foundation announces a historic payout increase. They get accolades from funder peers, current and prospective grantees, and sometimes journalists. Yet, between 2023 and 2024, they look to have increased their grant payments by a median of 3.1%—the industry standard. For a longtime funder and advocate for philanthropic transparency like myself, these announcements raise some big questions. Without more clarity and context, these payout figures can be misleading and harm the nonprofits supporting communities—and, because many of these organizations provide essential civic and public-interest functions, hinder democracy by underfunding the organizations that are protecting it.

What we need to know about payout rates and their context

First and foremost, what is a payout rate? Foundations are legally mandated to spend at least 5% of their endowment every year, which is not limited to grantmaking but often includes internal operating costs. Many foundations publicize their payout rates to demonstrate their generosity. But for their grantees, that figure has little significance unless we also understand what percentage of the foundation’s endowment is being spent on grantmaking.

Announcements of increased grant dollars that use words like “historic” and “record-high” without mentioning the payout rate can allow funders to appear active and responsive without actually moving more money. When announcing increases in payout, foundations should always include the payout rate, a breakdown that includes separate rates for internal operations and grantmaking, and a breakdown of dollar amounts.

Otherwise, they can confuse grantees about what funding is truly available, creating false hope or prompting them to shift strategies based on promises that never materialize. Grantees see headlines and assume support is growing; other funders and donors assume someone else is filling the gap—leaving communities still underfunded.

How vague payout announcements can harm the sector

In courting good will by disclosing a partial picture of their philanthropy, foundations ultimately harm the groups they support. Misleading grantees in this manner is disrespectful to those working on the front lines. Such lack of transparency can erode the trust between foundations and nonprofits. And that, in turn, can distract the sector from its real job—strengthening our democracy.

Sharing a clear understanding of a foundation’s payout practices is critical to ensure accountability and equity. Without these guardrails, foundations can inflate grantees’ and the public’s expectations of bigger outcomes based on the unkept promise of bigger payouts.

According to Candid’s 2025 Foundation Giving Forecast, fielded between January and March 2025, only 37% of foundations expected to increase giving last year, while the median payout rate for independent foundations remained at the 5% legal minimum in 2024. Meanwhile, overall U.S. charitable giving grew to $592.5 billion in 2024, but foundation giving was essentially flat, adjusted for inflation. That suggests many “record-high giving” announcements in 2024 likely reflect endowment growth more than expanded grantmaking as a share of assets. When foundations grow endowments faster than they expand actual grants, their public image advances—but not the flow of real resources to communities.

Why higher payout rates are urgently needed now

This would be troubling in any year, but it’s especially untenable now, amidst government pressure on the sector, decimated social safety nets, and increased attacks on immigrants, trans people, and other minorities, as well as threats to democratic freedom. Adjusted for inflation, foundation giving is already below pandemic-era levels. And according to NCRP, most foundations do not increase payout in response to crisis conditions. For years, average payout rates have hovered around the legal minimum. Meanwhile, demand for nonprofit services has risen sharply since 2020, widening the gap between what communities need and what philanthropy provides.

Why foundation transparency is more essential than ever

Philanthropy is meant to reduce inequity, yet its internal power dynamics often do the opposite. Foundations hold all the information and decision-making authority; nonprofits must navigate that imbalance with little leverage. To many grantees, this feels fundamentally hypocritical: Foundations often fail to model the transparency, accountability, and collaboration they require from their partners. Foundations ask for a panoply of financial documents from nonprofits in their grant applications. It’s only fair to ask for a semblance of reciprocity from the foundations.

To increase trust, transparency, and partnership, it’s important for foundations to disclose:

• What are their current and previous payout rates? Increases in the share of assets that go to grantmaking matters.
• What are the current and previous dollar amounts allocated to grantmaking? Raw numbers show scale, not just growth.
• Does the payout include internal operations or only grants? Transparency requires a breakdown of these categories, since internal spending can be rising higher than grantmaking.

Like the nonprofits they support, funders also have a responsibility to show how they are spending their money. Providing full data is part of that shared accountability. And nonprofit leaders should respond to foundation announcements according to the data, not the hype of the news release.

In 2026, my hope is that foundations will take steps that include creating a mechanism to disaggregate operation costs versus grantmaking and sharing the methodology publicly—for example, on their websites.

By providing more transparent financial data, foundations and the broader philanthropic sector can build greater trust with their grantee partners and the public.

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