Because most philanthropists want the lion’s share of their charitable dollars to go to social issues and causes, “expenses” has become something of a dirty word—you want to cut as many as those as possible lest they divert resources from more useful ends. Expenses, however, don’t necessarily deserve their bad reputation. In fact, the right kinds of expenses can be an investment in more effective philanthropy.
It’s not just what you pay for but how you pay that matters. When you give as an individual, expenses come out of your pocket. But when you have a private foundation, the foundation pays for all legitimate and reasonable expenses incurred in carrying out its charitable purpose including conferences, consultants, office supplies, and travel for site visits—and it pays with tax-advantaged dollars that count toward the foundation’s minimum distribution requirement (the “5% payout” that foundations are required to make each year).
Here’s how you can use expenses to make grantmaking more strategic, streamline operations, and enhance engagement.