Thursday, June 9, 2016

Observations from the Financials of the Donald J. Trump Foundation

Since I have covered developments in the finances of the Clinton Foundation here over the past few years, it only seems fair to take a look at the Donald J. Trump Foundation. A review of the financial filings of the Trump Foundation from the past five years led me to the following basic observations:

1. The Donald J. Trump Foundation is a private foundation but doesn't really behave like one.
The hallmark characteristics of a private foundation are that it (a) is primarily funded by the wealth of its founder or its founder's family; and (b) invests the endowed wealth (principal) and distributes only a percentage of assets each year (often approximating investment returns or the 5% minimum distribution requirement) so as to preserve the principal well into the future. The Trump Foundation doesn't exhibit either of these characteristics. 

In terms of funding sources, over the past five years the primary contributions received by the foundation came not from its founder but by others, with Comedy Central, NBC, a carpet wholesaler, and a sports marketing group leading the way.

As for its distributions, the typical private foundation model of spending near 5% of net assets in any given year is also upended with the Trump Foundation, which distributes much of what it receives rather than keeping a quasi-endowment. For illustration, consider how the spending of the Trump Foundation compares to the private foundations of a few other well-known individuals/families: the Bloomberg Family Foundation, the Charles Koch Foundation, the Perot Foundation, and the Walton Family Foundation.  The next chart details expenses as a percent of net assets for each in the most recent year.



2. The Donald J. Trump Foundation is a relatively small operation.
Though its founder is known for extravagance, the Trump Foundation doesn't have a huge footprint. Its most recent tax year is fairly representative of previous years, and shows just how small the operation is relative to other private foundations. Take the size of net assets under management, as shown in the following chart.


Lest one conclude that the only take-away here is that three foundations are much smaller than the other two, let's zoom in on the three smallest.


With just over $1 million in net assets, the Trump Foundation is just a blip compared to the others. One reason for this may just be that the organization doesn't maintain a quasi-endowment like the others.  However, a similar comparison also plays out when it comes to annual expenses, which were $596,700 for the Trump Foundation in the most recent tax filing.



3. The Donald J. Trump Foundation's grants are not politically focused. Actually, they're not really focused at all.
Over the past five years, the foundation has given grants to a wide variety of organizations, from more conservative ones like Citizens United and the American Conservative Union Foundation to those that would be considered left-of-center like GLSEN (a group advocating for LGBT youth in schools) and Protect Our Winters (a climate change advocacy group). Most grants, however, were to organizations without a connection to political causes. Recipient organizations run the gamut from locally-focused (e.g., Long Island Sled Hockey) to nationally-recognized (e.g., Leukemia and Lymphoma Society), with causes ranging from international aid (e.g., Maestro Cares), to veterans (e.g., Green Beret Foundation) to health care (e.g., The Nicklaus Children's Health Care Foundation) to education (e.g., Columbia Grammar & Preparatory School). Many recipient organizations are themselves foundations of other celebrities (e.g., Magic Johnson Foundation; Tiger Woods Foundation; Mariano Rivera Foundation; Joe Torre Safe at Home Foundation), and there were even grants to the Eric Trump Foundation and donor advised funds at Fidelity Charitable and Schwab Charitable. Some organizations received grants in multiple years, whereas others were "one-off" grants. In short, the grant provision strategy of the foundation seems quite scattered.

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