[World's most expensive soup] 'Monk Jumps Over the Wall' US$44billion: Buffett to Gates: Spend It!

I took my article from http://www.spiritof.info/giving/articles/time/giving.time.story2.html

The costly question: “Should foundations focus on perpetuating their resources or spending them?”

It is reported in the latest Berkshire annual report that Warren Buffet states strict rules concerning the spending of his shares that will go to charity after his death. After the closing of his estate, he wishes that every dollar of his gifts must be used within ten years. For readers who still do not know what Warren Buffet has done, I would like to reiterate that he stunned the business world when he publicly announced that he would donate $44 billion of his Berkshire Hathaway fortune to charity. Imagine using up $44 billion within ten years. And this is $44 billion in US mind you. This is equivalent to buying 30,137 PS3’s DAILY FOR TEN YEARS! Charities are now put in a spot because Buffett’s endorsement is a landmark moment in philanthropy.

Charities rarely exceed the minimum spending ratio of 5% of their entire organization’s asset value because they operate with the intent of lasting forever. Buffet’s new condition has disrupted the plans of many foundations due to this “time-limit” factor. On the good side, this “spend-down model” will provide donors with a greater control over how their money is spent. This will ensure that money is put into good use and spent promptly because “as organizations grow over time, the risk of bureaucracy and mission drift grows”.

I feel that this “spend-down model” is quite an effective method in ensuring that money is used wisely because it forces foundations to plan out the use of money without letting funds drift around aimlessly. If funds are kept loosely without a predetermined agenda, charities run the risk of misusing funds.

I would like to bring up the example of NKF’s misuse of funds. NKF had been telling Singaporeans that its reserves of S$262 million (as of June 2005) would not last more than three years. However, even if NKF had stopped fundraising all together, it would still have enough funds to see through its operations for 30 years. NKF had underutilized its funds by spending far less on dialysis than the public had been led to believe. This perfect example clearly shows that a “spend-down model” is effective in ensuring that money is promptly put into good use to ensure that funds do not get wasted on other things like pay rises.

However perfect this model may seem, it does have its downside too- wild spending. In a bid to use up the funds, organizations tend to spend extravagantly and unwisely, which often results in wastage of funds too. A good and balanced management is essential for wise usage of funds.

So be it US$44 billion or 1 rupiah, be it the “spend-down” model or the “safe-up” method, do your part to help the less fortunate to make OUR world a better place.

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