We post our audited financial statements and tax returns, IRS Form 990-PF, as they become available. A 990-PF is the IRS form used by all private foundations.
Ordinarily, financial statements are available in mid-June and our 990-PF in mid-November.
Our primary investment objective is to generate a 5 percent annualized real return over the long term.
For the five years ended December 31, 2011, the endowment has returned 4.5 percent per annum.
Our investment asset value as of Dec. 31, 2011, was $3.0 billion. This table from our 2010-11 Annual Report summarizes the foundation’s investment asset balances over 10 years.
In 2011, the Board of Trustees approved 346 awards totaling $170 million; $140 million was paid out to grantees over the course of the year. This includes the full value of multiyear commitments.
Financial Controls and Accountability
The firm Deloitte & Touche LLP is our independent auditor. The full set of audited financial statements for the year ended Dec. 31, 2011, the most recent available, is one of the records available above.
The Board of Trustees Audit Committee reviews the results of the independent auditor’s examinations and recommends them to the full Board of Trustees for approval. The Audit Committee reviews the annual operating plan and interim financial reports.
All our staff and trustees are required to submit annual conflict-of-interest statements and affirm adherence to the foundation’s code of ethics.
Reader’s Guide to the Form 990-PF
A private foundation must make its annual Form 990-PF available for public inspection. The Kresge Foundation posts this form for download on its website, kresge.org. The form provides information about the foundation’s financial and charitable activities for the year as well as assesses any taxes owed by the foundation to the IRS.
The tax return form and rules can be complex, so we hope that this reader’s guide will aid you in gaining a better understanding of our form. We have provided answers to some frequently asked questions as well as a table of key data points and their relevance by topic related to the return.
FREQUENTLY ASKED QUESTIONS
How much was Kresge required to distribute in 2011?
The foundation was required to distribute $153,033,078 as shown on Page 8, Part XI, line 7. The term the IRS uses for the minimum 5 percent payout is the distributable amount. The actual amount of adjusted qualifying distributions for the foundation in 2011 was $155,843,928 as shown on Page 8, Part XII, line 6.
How is the required payout calculated?
The IRS rules require the foundation to pay out 5 percent of its average non-charitable use assets, which is equivalent to the investment assets and any other assets that are not used directly in the charitable work of the foundation, adjusted for income tax and recoveries of amounts previously treated as qualifying distributions. This calculation is summarized on Page 8 in Parts X and XI of the return.
What types of disbursements count toward Kresge’s annual payout requirement?
Grants paid, program-related investments, exempt operating costs (those that further the charitable purpose of the foundation), and amounts paid to acquire assets used directly in carrying out charitable purpose all count toward payout.
Administrative and Other Costs
What were Kresge’s 2011 exempt expenses as a percentage of qualifying distributions and as a percentage of average assets?
Total exempt expenses as a percentage of qualifying distributions was 9.21 percent (calculated as $13,733,647 page 1, Part I, line 24, column (d) divided by $149,126,283 page 8, Part XII, line 4). Survey results of peer foundations with greater than $2 billion in average assets reveal exempt expenses as a percentage of grant payout of 12.78 percent for 2010.
Total exempt expenses as a percentage of average assets was .47 percent (calculated as $14,563,508 Page 1, Part I, line 24, column (d) divided by $3,083,309,098 Page 8, Part X, line 5). Survey results of peer foundations with greater than $2 billion in average assets reveal exempt expenses as a percentage of average assets of .90 percent for 2011.
Taxes and Other
What kind of taxes does Kresge pay?
The foundation is exempt from income taxes under IRS rules. However, is required to pay a 2 percent excise tax on net investment income, which can be reduced to 1 percent if certain criteria are met. Net investment income includes interest, dividends, net realized capital gains and other investment income, minus expenses for managing investments. The net investment income figure used in this calculation is shown on Page 1, Part I, line 27b, column (b). The 2011 net investment income was $197,354,648, which resulted in an excise tax of $3,947,093 as shown on Page 4, Part VI, line 5 of the 990-PF.
The Foundation is also subject to unrelated business income tax under IRS rules due to the nature of income derived from some of the investment vehicles held in the investment portfolio. This tax is calculated using the tiered corporate tax rate schedule.
Why do some foundations pay 1 percent in excise taxes and others pay 2 percent?
A foundation may reduce its excise tax rate from 2 percent to 1 percent if it disburses an amount above its required minimum distribution amount. In 2011, the foundation needed to distribute $168,219,406 (Page 3, Part V, line7) to qualify for the lower rate, which it did not qualify for by only distributing $155,843,928 (Page 3, Part V, line 8).
|Topic||Line Reference||Dollar Value||Comments|
|Administrative and other costs||Page 1, Part 1, line 24, column (d) and Page 8, Part XII, line 2||$14.66M||Consists of direct grantmaking expenses including salaries and operating costs of the staff who make and manage the grants, direct charitable expenses such as consulting and convening costs paid to support the work of our grantees, administrative costs to operate the foundation, including salaries and benefits for support functions such as finance and human resources, professional fees, office expenses, assets acquired, etc. Represents the costs allocated toward charitable purposes that are included in the foundation’s qualifying distributions in Part XII.|
|Grants paid||Page 1, Part I, line 25, column (d)||$140.60M||Represents grants approved and paid in 2011. The foundation also made $585K of program-related investments in 2011 for a grand total in giving of $141.18M.|
|Minimum distribution ratio||Page 3, Part V, line 3||5.39%||Represents the distribution ratio used in determining the required distribution for the foundation to qualify for the 1 percent excise tax; this ratio is based on the average distribution ratios from the 5 previous years.|
|Reduced tax rate minimum distribution||Page 3, Part V, line 7||$168.22M||The amount of distributions required by the foundation to qualify for the 1 percent excise tax.|
|Tax based on investment income||Page 4, Part VI, line 5||$3.95M||The foundation had a net gain position for 2011. The foundation’s excise taxes, calculated as 2 percent of its net investment income as shown on Page 1, Part I, line 27b, column (b).|
|Compensation of officers, directors and trustees||Page 6, Part VIII, line 1(c)||$1.74M||The attached statement (number 26 in the return) provides a listing of 2011 compensation and benefits paid to the foundation’s officers and Board of Trustees.|
Compensation of five highest-paid employees (other than officers, directors and trustees)
|Page 6, Part VIII, line 2(c)||$1.23M||Provides a listing of the 2011 compensation and benefits paid by person for the highest-paid employees.|
|Summary of program-related investments||Page 7, Part IX-B, lines 1 & 2||$585K||Describes the below-market rate deposits and loans made to organizations.|
|Minimum investment return||Page 8, Part X, line 6||$154.17M||The minimum investment return is generally 5 percent of the total fair market value of the foundation’s non-charitable use assets.|
|Distributable amount||Page 8, Part XI, line 7||$153.03M||Represents the minimum amount the foundation must distribute by the end of 2011 as qualifying distributions.|
|Adjusted qualifying distributions||Page 8, Part XII, line 6||$155.84M||The amount the foundation actually spent for charitable purposes for the year.|
|Actual distribution ratio||Page 8, part XII, line 6 divided by Page 8, Part X, line 5||5.05%||Although the return doesn’t display this ratio, it can be calculated for the 2011 year. The required minimum distribution ratio is 5.0 percent.|
|Cumulative excess distributions||Page 9, Part XIII, line 9(a)||$102.04M||The amount of excess distributions that the foundation may carry over and apply towards following years.|