The concept of limited-life foundations has been around for a long time, and has attracted interest in recent years with some brand-name foundation wind-downs, according a new report by the Center for Effective Philanthropy.
However, many foundations are uncertain about spending down, which prompted CEP to examine why limited-life foundations do so, what decisions are involved and what challenges they face.
The research was supported by the S. D. Bechtel Jr. Foundation, itself a foundation spending down by 2020, the CEP said.
In 2016, the multibillion-dollar Atlantic Philanthropies made its final grants, according to the report, and the billion-dollar Edna McConnell Clark Foundation said it would spend down within the next decade.
Moreover, a growing number of wealthy donors have signed onto the Giving Pledge, committing to spending the majority of their wealth “during their lifetime or in their will.”
For its study, CEP interviewed leaders of 11 foundations that planned to take down their shingle within the next 10 years. The interviews touched on nine aspects of their foundations’ spend down:
1. Why Spend Down
Foundation leaders most frequently cited a desire to have a greater impact. In many cases, the organizations’ donors wanted to see more impact during their lifetime on the issues that mattered most to them. After deciding to spend down, many leaders said they had experienced a sense of focus and urgency to be strategic.
When trying to figure out how to align their investment practices with their spend-down plans, some leaders faced the challenge of spending at the rate for which they had planned. Others focused on striking a balance between risk/return and predictability. Still others changed the extent to which their financial investments were aligned with their foundation’s mission.
In some instances, foundations increased the number of staff before ramping down. In others, they maintained staff levels or hired consultants to supplement existing staff.
Besides affecting staff size, the spend-down decision influenced whom the foundations hired, with some taking on people with experience and others looking for program staff willing to implement rather than create strategies.
The CEP report noted that limited-life foundations have the task of keeping staff motivated about the work and retaining them as the spend-out date approaches. It said the foundation leaders interviewed were giving careful thought to the “offboarding” of staff; a number of foundations planned to offer generous severance arrangements.