There is No One Way to Spend Down

While a small number of foundations giving $5 million or more annually in grants have made the decision to spend down, there has been much discussion of the topic in recent years. The announcement late last year that the Edna McConnell Clark Foundation would spend down its roughly $1 billion in assets only added to that growing interest.

And while, across different studies, we have found that under 15 percent of CEOs report that their foundation will be limiting its life, we have also seen that another 19 percent report that they are not sure of the promise that limiting life holds for increased impact. In other words, perhaps more CEOs are open to the idea — or, simply, to learning more information about it.

Further, even if their numbers remain small as a proportion of foundations, the dollars out the door of limited life foundations are often large, inevitably, as they spend down in a finite period of time. Given all this, with the support of the S. D. Bechtel, Jr. Foundation, we at CEP sought to learn more about those that have made the call to limit their life. We wanted to find out if we could identify an “arc” of spending down.

In 2016, we interviewed leaders of 11 foundations that were on their way to spending down. Today, we are releasing a new report, titled A Date Certain: Lessons from Limited Life Foundations, based on what we learned in those interviews.

Across these conversations, we found far fewer similarities than we had anticipated among the decisions these limited life foundation leaders have made on key topics that their foundations face on their way to spending down. We inquired about why they are spending down, changes they are making to their financial investments, how their staffing has changed or will change, changes they are making to their grantmaking and strategy, what — if anything — they owe their grantees, their thoughts on collaboration, how they are communicating about their spend down, how they are approaching evaluation, and their thoughts on archiving knowledge.

In only two of these areas did we see much similarity in the decisions that were made, or why.

When it comes to the main reasons for spending down, almost all of the leaders of these 11 foundations cited the opportunity to have a greater impact on the issues of interest to their foundation. Interestingly, this is in contrast to a 2009 study conducted by the Urban Institute, in which its authors wrote, “One of our most striking findings was how infrequently limited life foundations linked their longevity plans to their overall philanthropic mission, strategy, and impact.”

A second issue area on which we heard much agreement was the importance of, and desire to, archive knowledge. Many of these foundations do not yet have a clear plan for archiving, but their leaders were clear that it is something they have discussed and want to do.

On issues such as staffing, however, we saw great variety in approaches — from significantly staffing up to filling open positions with consultants rather than hiring any more staff. On the topic of evaluation, some leaders told us they have increased their emphasis on evaluation, while others are targeting their evaluation efforts toward specific programs or grants, and still others are uncertain about the relevance of evaluation given their limited life.

But for all the different decisions that leaders of these foundations have made and are making, what we learned they have in common is a shared commitment to planning: planning for how to responsibly exit their relationships with grantees; planning for how to make their financial investments match their time horizon; and planning for how to staff appropriately for the eventuality of closing their doors.

To accompany our report, we have also published a set of three case studies about the S. D. Bechtel, Jr. Foundation, the Lenfest Foundation, and the Brainerd Foundation, all of which participated in our larger research effort.

Our hope is that this research can be helpful both to those that have already decided to spend themselves out of existence and those considering it. I welcome your feedback.

Download A Date Certain: Lessons from Limited Life Foundations here.

Ellie Buteau is vice president, research, at CEP. Follow her on Twitter at @e_buteau.

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