PRIVATE FOUNDATIONS IN ITALY
SCENARIO: global trends in philanthropy Today. The trends outlined by Rien van Gendt reported in this paragraph refer to a global scenario but are well suited, even if with some distinctions and with some peculiarities, to the Italian reality. Nine trends that in some way (and not by chance) are interconnected.
1. There is a trend from just giving to investing. The financial means available to foundations are not made up only of donations, but include a greater variety of instruments, which tend to be used more and more: loans, equity participations and guarantees. Foundations that traditionally began as disbursement foundations, over time are transformed into fully operational or mixed ones. This phenomenon is accompanied by a level of maturity of the organizations and the ability to take on a specific know-how which in some cases brings an original and unique result of innovation and knowledge. Thus "distribution" goes beyond the concept of the gift and is transformed into a strategic social investment for society. This is also happening in Italy where only 20% of foundations are totally disbursement to third party organizations, and the most important foundations are real investors in society.
2. A second trend is that of transition from donating/investing to wanting to play a key role in politics: agenda setting, convening, advocacy. The investment policy is not reflected exclusively in the operational method of intervention, rather than the disbursement one, but in the desire to proactively contribute to the public debate regarding aspects and/or problems relevant to our society and subject to intervention by foundations. Compared to 2009, foundations in Italy have almost doubled; these are private capital destined for collective purposes. A profitable dialogue between public and private in relevant sectors could become an important axis on which to hinge a future welfare model based on dialogue between public administrations and private subjects such as foundations which, operating in the territories, are able to bring knowledge of the problems and ability to implement effective solutions.
3. As a consequence of the evolution of the role of foundations, there is one tendency to form partnerships between foundations. Foundations go online to multiply the impact of their activities and exchange best practices. In this sense, there is still much work to be done. Assifero, the association of Italian foundations and granting bodies, has 103 members among over 6200 Italian foundations. The European Foundation Center, which puts foundations on a European level, has over 200 members among the more than 129.000 active foundations in Europe.
4. The decrease in public spending, the growth of the philanthropic sector (both in number of foundations and in size), the growing visibility of the work of foundations allows the latter to have a greater weight on the international scene and therefore to be called ever more often to address major problems and global issues. This is certainly particularly true in Italy in the education and culture sector, as demonstrated by Rien van Gendt in his speech at the general assembly of Assifero (Association of Italian Foundations and Granting Bodies) in May 2015. Rien van Gendt worked in the last 30 years in the world of philanthropy with an experience gained thanks to his role in: associations of foundations: Dutch Association of Foundations (president); Dutch Philanthropic Organizations (SBF); Daphne (Brussels); Grant foundations: Bernard van Leer Foundation; Founded 1818; European Cultural Foundation; Alain and Marie Philippson Foundation (Brussels); Operating foundations: IMC Weekendschool; Partners in Health (Boston); Philanthropy service organizations: Rockefeller Philanthropy Advisors (New York), Van Gendt Philanthropy Services; Families / Family Offices active in philanthropy: EDLI, Sofam; – Corporate Social Responsibility programs and business foundations: G Star Raw.
5. There is a tendency to create multi-stakeholder processes on the part of governments, businesses and organizations, including multilateral ones, which also include foundations. Attention can be focused on something very specific and concrete, but also on something more global such as innovative partnership models to address the SDGs - Sustainable Development Goals.
6. A further trend for foundations, related to partnerships and the multi-stakeholder approaches/processes outlined above, is to make their identity (in particular their political and financial independence) and added value (innovation, risktaking, ability of evaluation, holistic approach, in-depth analysis at a territorial and local level). In Italy, out of over 6200 Foundations, only 60 are registered as active political foundations.
7. There is one tendency for foundations to take an interest in both global issues and problems of their local community. The Post-2015 Global Development Agenda provides an opportunity for foundations to act on these two levels. The Turin World Forum 'Localizing the Post-2015 Development Agenda' (13-16 October 2015) is an example of such an approach. The Sustainable Development Goals can act as a framework, be a source of inspiration and guiding principles for foundations and their work.
8. There is a trend for foundations to adopt a pragmatic approach and emphasize innovative forms of partnerships and sustainable solutions to solve problems, rather than trying to get involved in the formulation of the Sustainable Development Goals.
9. While on the one hand foundations tend to become increasingly important as game changers, on the other hand foundations fear that they will not live up to the expectations of the outside world. The source of income of most foundations (directly or indirectly) is the endowment of private funds. We currently live in a financial environment with very low interest rates. For foundations, therefore, it is very probable that for a period of time it will be necessary to be financed with fixed-income securities (bonds) which are unlikely to generate returns. In order to maintain the pay-out, foundations will be 'forced' to accept ever greater risk (for example, by entering higher tiers of equity and/or other risky asset classes) until they arrive at a level that exceeds their risk tolerance. This trend stimulates discussion of a philanthropic bubble and generates questions about low levels of structural pay-outs and also about the longevity of foundations.
INTERNATIONAL FOUNDATIONS
La organized philanthropy in the United States it is one of the most important economic sectors in the country. The 86.192 active American foundations manage total assets of $793 billion and disburse approximately $55 billion annually. The sector is very heterogeneous with large and mostly very small foundations. Indeed, 76% of foundations have fewer than four employees and 93% do not have a website. 70% of foundations with assets over $100 million have a website.
As for the the European philanthropy, thanks to the European Foundation Center and DAFNE it is finally possible to have a fairly reliable indication of the sector. Europe has approximately 129.000 active foundations serving the community with total assets under management of approximately $430 billion and total annual outlays of over $53 billion.
RADIOGRAPHY OF FOUNDATIONS IN ITALY
How many are there in all Foundations in Italy (how many private and how many public) and trend in recent years? The foundations active in Italy in 1999 were 3008, and in 2005 they became 4.720. The latest official data available, which still constitutes the reference today, dates back to 2011 with 6.220 active foundations surveyed, which testifies to a growth that more than doubled in 12 years. Private foundations (predominantly private funding source as well as governance) account for 81,9% (5.095, up from 78% in 2005). Foundations are, by nature, private, but in Italy there have been processes of transformation of public bodies (e.g.: former IPAB, former opera houses) and some processes of outsourcing of activities which have given rise to foundations with sources of financing (and governance mostly public. In Italy, 49,5% of Foundations are mainly operational; disbursements are 20,0% and mixed 30,5% (data referring to 2005).
The dislocation by geographical area of the foundations sees them more present in the North, but the growth rate in recent years is significant throughout Italy. Northwest 2.590 (2011) 1.071 (2005) Northeast 1.300 (2011) 666 (2005) Center 1.338 (2011) 699 (2005) South 992 (2011) 572 (2005). The largely prevailing sectors and in further growth, in which foundations in general operate more and more, but above all private ones, are "culture, sport and recreation", and "education and research", which is the first sector ever of intervention ( 27,4% of foundations). In 2011, 1.524 foundations (of which 1184 private) dealt with "culture, sport and recreation", and 1708 (of which 1.356) with "education and research". In 2005, 830 foundations (of which 572 private) dealt with "culture, sport and recreation" and 1.000 (of which 657 private) with "education and research". The sectors of activity of the foundations are also other; in addition to "culture, sport and recreation" and "education and research", there are: health, social assistance and civil protection, environment, economic development and social cohesion, protection of rights and political activity, philanthropy and promotion of volunteering, cooperation and international solidarity, religion, labor relations and interest representation, other activities.
The most up-to-date data shows that the assets of the foundations in 2005 consisted of 85 billion euros (85.441.000.000), of which 45 billion (45.850.000.000) managed by banking foundations (which became 40,855 billion in 2013). The world of foundations "weighs" proportionally as regards the total assets managed as those of banking foundations. How much income and how much is spent annually? The revenues of the active foundations in 2011 totaled €11.119.632.576,00 (in 2005, the pre-crisis period, they were €15.625.498.000,00), while the outgoings amounted to €9.950.694.334,00 for the 6220 foundations (in 2005 the outlays amounted to €11.530.300.000,000). The total of 347.602 non-profit organizations in 2011 recorded outgoings of 57.396.113.527 euros. Thus the expenditures of the 6620 foundations (2% of non-profit organizations) represent 17,3% of the total expenditures of the third sector).
Among the major areas of expenditure in 2011 are healthcare with 3.962.072.083 euros (which increases compared to 1.954.239.000 in 2005), social assistance with 1.207.176.887 euros (which decreases compared to 1.511.926.00 in 2005) and " philanthropy and volunteering” with 1.252.642.503 Euros (which is an increase compared to the 822.986 Euros of 2005). On the other hand, "union relations" collapsed from 3.883.044.000 to 8.664.697 Euros (which explains the bulk of the difference between the total values of 2011 and 2005). At the top positions are "education and research" which has increased significantly in recent years (and is 70% made up of expenditure by private foundations) and "culture, sport and recreation" (which instead decreases). Out of the total, in 2011, foundations recorded expenditures in the “education and research” sector of 1.249.626.471 euros (of which 1.356 private foundations spent 890.234.037 euros). In 2005 expenditure in the “education and research” sector amounted to 950.770.000 euros. Also in 2011, the foundations recorded expenditure in the "culture, sport and recreation" sector for 972.294.192 euros. In 2005, outgoings in "culture, sport and recreation" amounted to 1.346.335.000 Euros. Three further contextual reflections are interesting. The first is that public spending on "education" in Italy in 2011 amounted to 66,861 billion euros (4,1% of GDP) while for culture it amounted to 8,265 billion euros (0,5% of GDP) . It appears evident that the expenditure of foundations in the sectors examined, if compared to the total public expenditure, represents a very noteworthy value.
The second consideration concerns regional public investment in education. Compared to the national data relating to expenditure for education, it is in fact interesting to note the regional differences. Emilia Romagna, for example, is in the penultimate place in the "ranking", with a percentage of GDP equal to 2,6% in 2011.13 The work of a private foundation in the education sector in this region acquires an even greater impact in relative terms . Quoting from ISTAT: "For the policies to support the learning of the population and the increase of knowledge, the Italian regions show behaviors that are distant from each other: the regions of the South, characterized by a greater presence of population of school age, are those which invest relatively more in this sector, with an average share of the area equal to 6,4 per cent of GDP. In the other divisions, expenditure on education and training as a percentage of GDP is decidedly lower; in the Centre-North it remains stable just below 3 per cent. Calabria, Sicily, Campania, Basilicata and Puglia are the regions where the incidence of public spending on education and training was highest (between 6,1 and 7,2 per cent of GDP in 2011). Among the areas of the Centre-North, Valle d'Aosta and the autonomous provinces of Trento and Bolzano show higher values than the geographical area to which they belong: expenditure on education.
The third consideration concerns the overall impact of non-banking foundations which should be considered more on the Italian socio-economic panorama, as it is increasingly comparable with that of banking foundations (whose role is better known and recognized by both public opinion and works, compared to other foundations). However, the exact quantitative comparison regarding disbursements is not yet possible due to problems of different calculation metrics. However, in general it can be observed that in 2005 the 88 banking foundations gave a total of 1,3729 billion euros to third parties (of which 408 million for art and culture and 143,9 million for education and school). Disbursements to third parties from banking foundations then decreased in 2011 to 1.092,5 million and in 2013 disbursements to third parties were recorded for only 884 million. Beyond the methodological issues, the decline in disbursements to third parties is confirmed by the data for both banking and non-banking foundations. In addition to being clearly affected by the crisis factor, this decline is also indicative of a change in the organizational models of foundations, which evidently characterized non-banking foundations more strongly. In the 19th ACRI report (relating to banking foundations, but presumably the discussion can be extended to all foundations), it is highlighted how in the last decade there has been a change in the organizational model of foundations, as also already highlighted in other parts of this document, from a more strictly disbursing role to mixed/operative foundations; from elementary structures to complex structures, with a progressive subdivision of functions and responsibilities and a quantitative and quantitative enrichment of the workforce. It is no coincidence that personnel expenses increase, and purchases of goods and services increase, but disbursements to third parties decrease.
Given the contribution offered by private foundations in certain sectors, one wonders if tax incentives could not be activated?! From the 19th Acri report it emerges that the treasury constitutes the second sector of intervention of the banking foundations, placing itself in terms of amount after Art and before Research and development. In an interview with Repubblica Finanza Gerry Salole, Director of the European Foundation Centre, declared: «On the basis of a research conducted by our center on the subject of taxation, only four countries out of the twenty-four analyzed tax foundations. Italy is one of them. But this withdrawal causes disbursements to drop, and this does not seem to me to be in line with their founding act".
Attachments: Foundations in Italy.pdf
