Wall Street Woes Could Hurt Nonprofits

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Uncertainty on Wall Street could spell frustration or worse for those who depend on grants from foundations, whether those foundations are connected with Wall Street directly or just dependent on the portfolios that make up their endowments.

When Lehman Brothers Holding Inc. filed for bankruptcy on Sept. 15, the fate of millions of dollars in pledges to youth organizations and others from the Lehman Brothers Foundation fell into the same limbo as the investment banking firm. Although the foundation is corporately separate from the investment banking company, most of its support had traditionally come from Lehman Brothers employees, who were urged to contribute 4 percent of their earnings each year to charity.

According to its latest available tax return, the foundation had total assets of $23.7 million at the end of its fiscal year last November. It also had $11.5 million in grants that were scheduled to be made. It is unclear how many of those grants had been made by Sept. 15 and what the foundation’s assets were worth then.

According to its 2007 Annual Report, Lehman Brothers Foundation distributed $10 million in grants in the United States in fiscal 2007, while the corporate philanthropy arm of Lehman Brothers distributed more than twice that much.

Among the youth programs scheduled to receive money from Lehman Brothers Foundation are Harlem Kid’s Zone ($3 million from 2007 to 2009) and Teach for America ($3 million from 2006 through 2008). Many of the youth programs that Lehman supported are located in and around New York City.

Similarly, the Freddie Mac Foundation took pride in the fact that it was the largest corporate funder in the Washington region, handing out almost $7 million to local nonprofits in the first six months of this year. The awards for the second half of 2007 totaled almost $13 million.

Almost all of the Freddie Mac grants involve children, primarily foster children.

The Freddie Mac Foundation is a separate entity from the corporation, but Freddie Mac spokesman Shawn Flaherty said that because the corporation was taken over by the U.S. government, the organization’s conservator, James B. Lockhart III, director of the Federal Housing Finance Agency, is reviewing charitable giving by both the company and the foundation. He, along with new Freddie Mac CEO David Moffett will make a determination about giving.