Steps to a Successful Spend Down: Strategic Priorities

By Mariah Schuknecht

At the Andrea & Charles Bronfman Philanthropies (ACBP), we have continuously researched spend down organizations since the decision was made to sunset ACBP by 2016.

We have been surprised by the limited content available on the process of how foundations spend down, rather than the more broadly discussed topic of why foundations spend down. (We’re glad to see this starting to change, with resources like Duke University’s online spend down research library).

We therefore went on a mission to consolidate both the process-related experiences of ACBP and other organizations’ research papers and articles relating to spending down. This is the first of two blogs this month that highlights the steps involved and items for consideration that we have organized from our research. This post will highlight strategic priorities, while the next will focus on operational components. We hope these two checklists will help other organizations as they grapple with similar spend down questions.

Let us be very clear from the outset – the spend down process is not a perfect science, nor is there a handbook that can mold a perfect strategy. As GrantCraft often shares, and as is a relevant reminder here, philanthropy and its strategies are not a one size fits all. However, we are of the opinion that by asking the right questions, foundations can make sound judgments about their spend down to make it more meaningful, strategic, and able to achieve goals – rather than being deterred by unneeded challenges. Here’s our guide to asking the right questions:

1. Evaluate overarching programmatic priorities.

  • What is the legacy objective, if any? Is it the name of the foundation, the programmatic impact, or both?
  • Who will make the legacy decision? The founder(s)? His/her children? Trustees? Staff members? Some combination?
  • Will future generations continue the foundation’s legacy or impact objectives through other means?
  • If there is a living donor, how will s/he engage philanthropically after the spend down takes place (if at all)?
  • How might the foundation need to adjust its current programming to meet the legacy objective?
  • Will there be an endowment at the close of the foundation? If so, to whom will it be distributed?

2. Determine when to spend down and how to communicate it.

  • Should the date drive the program goals or the program goals drive the date?
  • Is the foundation’s lifespan long enough to make appropriate program planning adjustments?
  • Who needs to learn about the foundation’s decision to spend down?
  • How and when will the spend down be communicated to partners and grantees?

3. Carry out assessment of current programs.

  • What types of qualitative and quantitative criteria should be used in the assessment?
  • How do those criteria align with the foundation’s present and legacy objectives?
  • How might the assessment handle comparisons among grantees and within various funding portfolios?
  • Should outside consultants or an evaluation firm conduct the assessment?
  • Who should be involved in the assessment? Founders? Trustees? Staff? Grantees?
  • Should the assessment be carried out anonymously or publicly?

4. Wind down funding of non-essential grantees.

  • Has it been clearly communicated to the grantee that funding will soon stop?
  • Is a transparent timeline in place for reduction of funding?
  • Has the timeline been communicated with adequate lead time to each grantee? If not, can the foundation consider readjusting the schedule?
  • How might the foundation assist with transitional support or attract replacement support from other funders?

5. Enhance capacity and funding for core grantees.

  • What steps must be taken to ensure core grantees have the financial and operational expertise to continue after the spend down?
  • Will the foundation provide capacity building – monetary or in-kind – to enable grantee sustainability in the areas of:
  • Fundraising and donor relations management?
    • Financial and organizational management?
    • Governance and board management?
    • Strategic planning?
    • Leadership development and staffing?
  • Have actionable fundraising plans been created by grantees with reserves in place in case financial goals are not reached?
  • How will the foundation and grantees balance responsibilities to search for new partners?
  • If the foundation has incubated grantees, how can the grantee mitigate the “branding” effect that often ensues and onboard new partners?
  • Are there merger possibilities for incubated grantees in order to consolidate operational capacities?
  • Should the foundation use a dashboard or other tool to track and analyze progress of grantee strength and sustainability throughout the spend down process?

6. Determine if new program initiatives will be considered.

  • Will new initiatives invigorate the staff and potentially prevent loss of enthusiasm?
  • Is it practical (or necessary) to reduce funding for other grantees to fund new initiatives?
  • Can the foundation transition from a grantmaking organization to one that offers non-financial support to grantees through mentorship?

7. Determine closing and post-close strategies.

  • How can the foundation spend its time meaningfully capturing lessons learned and networking grantees and funding partners to leverage its investments over the years?
  • How should the foundation’s successes and impact be celebrated? If there is an event, who will be invited?
  • How will the institutional knowledge created and accumulated throughout the foundation’s lifespan be preserved?
  • Where will this knowledge (and documentation) be archived? By a partner or supporting membership organization?

We hope this list will illuminate important spend down considerations and will assist other organizations in thoughtfully examining their own priorities and processes.

Stay tuned for the next post in this series, which will underscore operational practicalities to consider for sun setting organizations.

Mariah Schuknecht is a Project Manager at the Clinton Foundation. Before joining the Clinton Foundation, Mariah served as Management Intern at the Andrea & Charles Bronfman Philanthropies. This article reflects the views of the author and not those of the Clinton Foundation.

[eJP note: “Making Change by Spending Down” is a new commentary series of The Andrea and Charles Bronfman Philanthropies (ACBP) – in partnership with the Foundation Center – to share insights and lessons of ACBP as it spends down its endowment by 2016 and closes. Each month various stakeholders will contribute new posts that will explore how ACBP’s decision to spend down affects a broad range of interests: from mission, employees and grantees, to investments and legacy. Decision makers across the social sector will benefit from the first-hand knowledge and community of learning being created.

The series – which will run for a year or more – is being disseminated through the Foundation Center’s GrantCraft blog and here on eJewish Philanthropy.]