By Ian Riseley, Rotary Foundation Trustee, Foundation Finance Committee chair
I’ve been very involved in the development of our Foundation’s new funding model and have closely followed the questions being raised about it in social media and elsewhere. The new funding model for The Rotary Foundation was developed because our ability to continue “doing good in the world” depends heavily on the Foundation having long-term financial stability. In the interests of improved communication and understanding of the changes, here are 10 important things to know about the new model, which becomes effective on 1 July 2015.
- Rotarians and clubs will benefit
Rotary’s strength lies in the talents and dedication of its members and clubs. The recent recession showed that we must have adequate reserves in our Rotary Foundation to ensure that we don’t have to cut programs and services in times of poor investment returns, and the increased volatility in financial markets emphasized the need for an adequate level of reserves. The new funding model is necessary to ensure resources are available to support the work of Rotarians now and in the future. The Foundation’s current policy is to maintain an operating reserve equal to three years’ worth of operating expenses.
- PolioPlus Fund contributions are not affected in any way
- Endowment Fund Contributions are not affected in any way
- District Designated Funds are not affected in any way
- 5% of Annual Fund contributions are set aside from the World Fund
After Annual Fund contributions are invested, 50% will continue to go to District Designated Funds (DDF) and 50% to the World Fund. The 5% being set aside to help pay for the Foundation’s operating expenses will come from the World Fund, but will only be used if needed to pay those expenses or to fully fund the operating reserve. If they are not needed for those purposes, they may remain in the World Fund for grants.
- 5% of cash contributions for global grants set aside
Under the current system, cash contributed in support of a grant by clubs and districts requires administration, but provides no investment income to meet the cost of that administration, because the funds are not retained by the Foundation for any length of time and therefore do not generate investment income. The 5% set aside from cash contributions for global grants will help pay the costs of processing, etc. It is not uncommon for many clubs to support a single global grant, and some clubs include payments from many members, thus requiring donor recognition to be processed for each contribution. Cash may also need to be converted into one of the 28 official Rotary currencies and then transferred to an international bank account for the project to be implemented.
- Up to 10% of corporate gifts set aside
Using up to 10% of large corporate contributions for operating expenses is a well-accepted practice among donors to charities. By obtaining such gifts, the Foundation can increase support for the projects in our areas of focus. Our polio eradication efforts, for example, have benefitted greatly from the Bill & Melinda Gates Foundation’s support. Up to 10% of these gifts will contribute to our administration costs, thus leaving more funds to support the grants for clubs and districts.
- A communication plan is in place
The Trustees recognize that open, clear communication fosters Rotarians’ continued support of, and active involvement in, Foundation programs. The first step in the funding model communication plan was an announcement on Rotary.org. You can now download a slideshow presentation with notes or without.
- Training and resources are being developed
Training manuals for officers and committees at the district and club levels are being updated, and webinars and e-learning modules are being developed. For details, contact fundingmodel@rotary.org.
- The Foundation has a record of financial stewardship and transparency
Our Foundation has consistently earned high ratings for sound fiscal management from Charity Navigator and other agencies. Find more on Foundation finances and ratings.
Questions or comments? Please, contact fundingmodel@rotary.org.
I hope you will continue to make our Foundation one of your preferred charities. Every contribution is important and deeply appreciated. The projects and work we accomplish together as Rotarians are life changing.
Rotary Voices 
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I agree with the observation made by both Rtn David Hartcher & PDG James Castley. With the introduction of Future Vision, the no. of matching Grants must have come down, which was proved by the figures ( No. of approvals) for 2012/13 & 2013/14. In such an event, why 5% towards admin. expenses?? If the RI HQ shows the lead, all others will follow down the line. There is a tendency to increase the District Dues by the DGs every other year, instead of making their operation lean & economical, particularly due to change/shift in communication thro’ E-mails, which is FREE, compared to earlier postal/courier letters. Any thought on this????? .
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I agree with David Hartcher’s comment above,
What has happened to the savings the TRF has made in pushing so much of the grant processing onto Districts since the introduction of the new Future Vision Grants model?
In 2012-13 the TRF processed 2,150 grant approvals , and while it 2013-14 this was reduced to 800+ a reduction of some 60%. Where has this cost saving been realized in this discussion ?
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I support the introduction of a 5% fee, but nothing has been mentioned as to the historical retention of donated funds for three years to earn interest. This should be abolished to provide greater transparency. There has also as far as I am aware not been any statement as to how TRF aim to reduce costs. In recent years, businesses and individuals alike have cut costs reflecting the global necessity to do so. Conversely TRF and RI appear to remain committed to increasing costs which is reflected in increased RI dues annually.Clubs and Districts in the main are committed to fiscal responsibility with minimal increase in dues to their members. I urge TRF and RI to do likewise.
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I thought as Rotarians we bore the costs of projects so that 100% of funds we raised were spent on projects. Too many charities have too much administrative tail.
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I am not in agreement. I have always boasted that unlike other charities Rotary uses100% of funds donated for charity strictly for charity and not for administrative expenses. This was a mantra I learned from day one in Rotary. Charity funds are kept seperately and used 100% for charity. Why do we now have to be like other charities. Why cant we continue to be different. This new development is not sounding good and may cause further attrition in membership.
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Given the incredibly low return on “low risk” investments that are currently available to TRF, or any of us for that matter, these changes appear to be a reasonable effort to maintain programs and continue to do good. What would be a better course of action?
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There is no mention of what has been done to reduce the operating costs of managing the Foundation funds. Surely this is a pre-requisite to any diversion of funds to pay expensive fund managers? This feels to me like the culture that exists in commercial investment banking where the operators of the funds ensure they take their cut before looking after investors, in this case honest Rotarians who thought they were part of an organisation comprising fellow volunteers at the various levels (local, national, regional and international).
Why has it taken this site to make this announcement prompted by a fellow ‘ordinary’ Rotarian, rather than being initiated in a global communication from the RI Directors and Trustees, or have I missed that?
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The announcement was made previously – please see link above called Securing Our Foundations Future.
I believe the Trustees are continualy reviewing their costs, like any good business should and are to be congratulated, on their stewardship.
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I don’t see banks (who continually review their costs) imposing 5% charges on those who allow their money to reside with them – in fact they pay a small interest rate and still manage the overheads of all their high street premises and enormous HQs, so why is not RI more efficient in looking after our money?
Every $ rested with Foundation this year will buy less in 3yrs time, even if we get that whole dollar back, so how is this good business?
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This feels no different than a tax increase that is supposedly dedicated to a worthy cause. We must eat it and like it because the “powers that be” have decreed it. It’s a done deal and we will like it AND make others think it is a wise program.
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Why does not Rotary Foundation use the investment income derived from the permanent fund for all its administrative expenses and carry on as before investing donations to the world fund for 3 years before spending it on its programmes? This way all the contributions from Rotarians, Clubs and Districts will be used for the purpose they were contributed ie Rotary Foundation Programmes?
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In order for the Permanent Fund to remain permanent and vital, it must continue to grow its assets to keep up with inflation. In addition, a portion of the income from much of the Permanent Fund consists of funds that are designated by the donors for specific purposes (i.e. the Peace Scholar program). Therefore, it would not be a proper use of funds, nor would it meet the Trustees’ fiduciary responsibility to the donors, to have the Permanent Fund pay all of the overhead of The Rotary Foundation.
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Reblogged this on 5550opinions and commented:
This is a followup to the May 2, 2014 post Trustees Approve New Rotary Foundation Funding Model
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I’m happy to see that TRF has stepped back from the idea of using this fee for self promotion and recruiting of corporate sponsorships.
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