Spend Out vs. Perpetuity: Raising the Question

Wednesday, August 5, 2009

By Anita Nager
Former Executive Director, the Beldon Fund

Nearly two months ago, the Beldon Fund closed its doors, completing the ten-year intentional spend out envisioned by our chair and donor John Hunting. We did it! With this act, we joined a small cadre of foundations, many in the New York region, which have already spent out, or announced their intention to do so.

A trend? Hard to say. Research by the Foundation Center shows a modest uptick in the decision to spend out by family foundations. If my private conversations with executive directors and foundation board members are any indication, the spend out vs. perpetuity question is on the table for a growing number of private foundations. They are hungry for advice and examples.

Reasons for spending out vary, but the current economic downturn has raised new considerations. Many are wondering out loud whether spend out can be an opportunity to turn the adversities of the downturn and drastically reduced foundation assets into opportunities. Spending out, over a limited period of time, makes it possible to increase annual grantmaking multifold and strategically focus grant investments. These are particularly compelling arguments at a time when the needs in the grant seeking community are great, many funders are cutting back, and the policy environment is ripe.

Spend out vs. perpetuity is a question with no right or wrong answers. Philanthropy thrives on a diversity of approaches. But if a foundation or donor chooses to spend out, there are helpful individuals and resources at the ready. The Beldon Fund case story, “Giving While Living,” is downloadable from www.beldon.org, along with independent evaluations and lessons and tips for grantmakers.

Many of the Beldon lessons are broadly applicable, but take on a particular urgency for a foundation with a finite lifespan. How will you attract and retain good staff? How will you focus your programs, measure progress, cut losses, and move on? How will you restructure and recalibrate your investment strategy for predictability so that you can fulfill your programmatic goals? How can you work with your grantees to exit responsibly?

The response to the Beldon Fund’s example has been gratifying. One colleague, the executive director of a New England-based family foundation, told me that our materials provided a framework and permission for the board to discuss spend out vs. perpetuity for the first time in its history. The board decided not to spend out, at least for now. But the question is no longer forbidden.

In considering the option of spend out—raising the question—foundation leaders will provoke critical conversations about foundation missions and opportunities for impact and, whatever the conclusion, emerge with a greater focus and collective sense of purpose.

Anita Nager is the former Executive Director of the Beldon Fund. The Fund, founded and chaired by John Hunting, invested its entire principal and earnings over a ten-year period towards strengthening advocacy, civic engagement, and public support for sound environmental policies. Ms. Nager supervised the Fund’s final spend out, its communication of lessons learned, and, in May 2009, its conclusion of operations.

Before joining the Fund in 2001 as its Director of Programs, Ms. Nager served as Senior Program Officer for Community Development and the Environment at The New York Community Trust. A former Philanthropy New York Board Chair, she is also a past board member of the Neighborhood Funders Group and the Environmental Grantmakers Association (EGA). Ms. Nager is a Trustee of the Hudson River Foundation and a founding board member of Cause Effective, which provides management assistance and resource development assistance to nonprofit organizations. She is also a Founder and current Co-Chair of the Health and Environment Funders Network, and recently joined the board of the Jenifer Altman Foundation, an EGA member organization. Ms. Nager was recognized by the Breast Cancer Fund at their 2008 Heroes Tribute for her “philanthropic leadership and nurturance of the environmental health movement,” and in June 2009 she was honored by West Harlem Environmental Action with its 20th Anniversary WE ACT for Environmental Justice Award, and by Cause Effective with its Legacy of Service Award. She can be reached at beldoninfo@yahoo.com.

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