Kim McKelvey is executive director of ALPS Foundation Services, a consulting firm dedicated to meeting the needs of state and local bar foundations and associations. For more information, visit www.foundationservices.com.
Bar foundations and other legal foundations distributed more than $210 million to law-related causes in 2007, of which more than $153 million was granted to access to justice programming, according to a recent report released by the National Conference of Bar Foundations. As a basis for comparison, the level of congressional funding for the Legal Services Corp. in 2007 was $329 million. Collectively, bar foundations and other legal foundations in-creased the resources available to those who lack the means to access the justice system by 33 percent over the fed-eral government’s appropriation.
These findings and others are contained in the National Conference of Bar Foundations report, “The State of Bar Foundations Survey: Part I— Cumulative Impact Analysis.” NCBF commissioned ALPS Foundation Services to conduct a national survey of bar foundations and other legal foundations to further NCBF’s mission to promote the integral role bar foundations play in advancing law-related philanthropy. The full report is available at www.ncbf.org.
The two-part survey was sent to 269 foundations in 2008. Of those, 137 foundations responded to Part I of the survey. The questions in Part I focused on revenue, distributions, value, and impact of foundations nationwide from 2005 to 2007, and the data and analysis reveal several interesting results. Below are some of the highlights.
Foundations generate revenue from a variety of sources, including donations from the legal community and general public, interest on lawyers’ trust accounts, special events, and endowments. Foundations that responded to Part I of the survey generated more than $900 million in revenue between 2005 and 2007. Foundation revenue increased by more than 180 percent in the same time period—from $200 million in 2005, to $300 million in 2006, to $400 mil-lion in 2007.
IOLTA funds accounted for the bulk of foundation revenue each year. As most readers probably know, IOLTAs are pooled interest-bearing accounts for deposit of clients’ funds that would earn insubstantial amounts for the cli-ents. The interest on these accounts is collected by state IOLTA programs and redistributed in grants to causes ap-proved by statute. In 2007, $340 million of $400 million in total foundation revenue came from IOLTA funds.
The overall increase in foundation revenue from 2005 to 2007 is indicative of the changing interest rate environ-ment during that period. As federal interest rate indexes rose, IOLTA funds increased. Of significant interest, how-ever, is the fact that IOLTA funding and non-IOLTA funding increased at the same rate from 2005 to 2007.
The increase in non-IOLTA funding indicates that fund development efforts for foundations that rely on non-IOLTA funding (e.g., from fundraising, fellows programs, and special events) improved from 2005 to 2007, generat-ing additional revenue for foundations. But despite the positive growth in this area, the survey results indicate that foundations should continue to work to maximize lawyer giving. In 2007, only $24 million in revenue was generated by lawyer giving (defined as giving through fellows programs, law firm drives, law firm campaigns, lawyer dona-tions, and dues check-off programs). Lawyer giving in IOLTA foundations accounted for only 2 percent of those foundations’ total revenue. Even more surprising, lawyer giving in bar foundations, which generally rely heavily on donations from the legal community, accounted for only 24 percent of non-IOLTA foundations’ total revenue.
Despite the overall increases in revenue, smaller foundations are struggling. While foundations with $100,000 and more in revenue experienced growth rates of up to 64 percent, foundations with under $100,000 experienced minimal growth. The smallest foundations, those with less than $20,000 in revenue, averaged a 32 percent loss from 2005 to 2007.
Foundations distribute their funds to law-related causes in their communities through grants, scholarships, loan re-payment assistance, pro bono, programs that help lawyers who experience difficulty, efforts to support the admini-stration of justice, and other vehicles. More than half of foundations surveyed listed funding or running access to justice programs as their primary mission, and 73 percent of foundation funds are distributed in grants to support access to justice efforts.
Whether a foundation focuses on access to justice efforts corresponds with its size and type. For example, state foundations distribute a higher percentage of their funding to access to justice grants. Larger foundations also tend to designate the majority of their funds to access to justice efforts.
Specialty foundations and local and county foundations distribute a higher portion of their funding to internally run programs and scholarships. Smaller foundations provide relatively little (5 percent) of their funds for access to justice efforts. Many smaller foundations, and almost a quarter of all respondents, listed law-related education as their primary mission. However, only 1 percent of total funding in 2007 was distributed to law-related education programs.
Smaller foundations tend to provide a high percentage of revenue back to their communities (86 percent) but also experience relatively low revenue growth. Local and county foundations experienced a 24 percent growth rate from 2005 to 2007, and state foundations experienced a 57 percent growth rate. However, smaller foundations experi-enced only 5 percent growth.
Foundations significantly impacted their communities by generating revenue in a variety of ways, and distributing revenue to law-related causes every year. Foundations provide considerable grants to access to justice programs, support law-related education programs and charitable projects, and provide scholarships and loan repayment assis-tance.
Part II preview
Part II of the NCBF survey builds on the baseline data about revenue and distribution collected in Part I. Part II questions focused on the details and diversity of foundation work. Data provide descriptions of foundation revenue streams, including specific types of lawyer giving, earned income, fundraising, and IOLTA funds. The survey delves more deeply into foundation expenses by type and amount, including expenditures related to fundraising. Partici-pants provided information about dues check-off programs, board giving, fellows programs, and IOLTA enhance-ment activities.
Together, the reports analyze foundations’ challenges, successes, and best practices. The Part II report was re-leased in mid-February at the Midyear Meeting of the National Conference of Bar Foundations; in a future issue of Bar Leader, we will share some of the highlights from that report.