Framework for Not-for-Profit Spending Policy

This technical report outlines the components and considerations of a spending policy for not-for-profit organizations. It emphasizes the importance of balancing current and future beneficiary needs through a well-defined spending policy. The report details two primary components of a spending policy: spending rate and spending methodology. The spending rate is expressed as a percentage of assets or a fixed dollar amount, while the spending methodology defines how the spending amount is calculated annually. The document discusses the implications of these components on the sustainability of the asset pool and the interests of both current and future beneficiaries. It highlights the necessity for fiduciaries to coordinate the spending rate with portfolio returns to ensure a balance between immediate support for current beneficiaries and long-term asset growth for future generations. The report aims to provide a framework for not-for-profit fiduciaries to develop effective spending policies that align with their organizational objectives.