Overview

A small, high-payout foundation decides to spend down in three years; issues include the practical aspects of going out of business, grantmaking changes, and consideration of legacy.

The Haigh-Scatena Foundation, which has been in existence since 1967, has long been what its executive director and sole employee, Ron Clement, terms "a hybrid of a grantmaking and operating foundation." Hired in 1989 with the mandate, "We want you to be helpful," Clement, a 20-year veteran executive director of non-profits, spent about half his time developing programs and finding resources for 50 or so of the foundation's grantees. Also unusual was the fact that Haigh-Scatena paid out at a rate of about 15 % each year, which corresponded to its average investment return over the 18 years that Clement has been at the foundation.

The $3 million foundation, which funds social change, particularly in the area of juvenile justice, had also contemplated spending down at various times in its existence. In 2004, the trustees definitively made the decision to do so - by August 31, 2007. The trustees had numerous discussions about the best way to expend its assets in such a short period of time. One issue was that the prospect of spend down made the trustees think about the Foundation's legacy, which had not previously been a concern. "When you're a change funder, you're always funding works in process," Clement says. "Now, the trustees are confronted with the question, is there going to be a legacy, a significant change you can see before we are out of business? There probably won't be, though we might get lucky. I told the board that this is why foundations decide that the best thing to do is to put their name on a building, because it will always be there, where you can see it."

At first, distributing all the money among the 75 regular grantees was considered. However, since the Foundation would no longer be providing ongoing operating support, it was decided that some larger grants to fewer organizations would be more useful. For the first time, Haigh-Scatena issued a request for proposals, and gave $100,000 grants to 11 groups. The trustees wanted to use the foundation's final $800,000 in grants to make an important contribution to its key area of juvenile justice as well as to address the legacy issue. After some research, it was decided to expand the focus area to "Juvenile Offender Re-entry," and in January 2007, the Foundation issued another RFP to seven organizations. In March, the $780,000 final grant was awarded to a proposal from a consortium of four of the groups; each of the other three received $25,000 in general support, which required dipping into the foundation's contingency funds. The chosen proposal, Clement said, was appropriate for a legacy grant: "With one grant, we will be supporting a short list of some of the very best people and organizations working on juvenile justice reform in California. Also, the grant is large enough, the recipients well enough known, and the focus current enough to generate some attention soon." The "impeccable finances and reputation" of the grantees were also important, given the Foundation's closing. Clement says. "They are solid enough to minimize any concerns we could have about problems with performance, disreputable conduct, or regulatory agency attention arising in the next year or two."

The mechanics of spend down have included legal review and liquidating the foundation's portfolio (moving from equities to bonds to cash). With the help of attorneys and accountants, Clement did research and laid out a detailed operational plan "with every task I could think of, month by month. I'm constantly updating it." One important consideration is staff: a foundation in spend down does not want to lose its employees before the operation is complete. The board gave Clement a formal employment contract, which includes a settlement if he stays through the end. The prospect of both federal and state oversight of the Foundation's closure has required special care. For example, the California attorney general's oversight process takes several months, so papers need to be filed by the end of April in order to meet the Foundation's deadline - not necessarily an easy task, given that the board members have some final discretionary grantmaking to do, and are used to operating on an ad hoc basis. Oversight considerations have also had an effect on final grantmaking. For example, one of the proposals from the second RFP was explicitly for lobbying work, something that foundations by law are not permitted to fund. In the past, Haigh-Scatena might have tabled the proposal and helped the group revise it, so as to make it acceptable. "We don't have time to do that now," Clement says. "My board has never had to look at a project and say, we have to disqualify you."

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  Resources

• Executive Summary
• Full Report
• Order Print Copies

  Report Contents

• Introduction
• Focus: The Whitaker Foundation and the Helen F. Whitaker Fund
• The Learning Curve: The Beldon Fund
• Retooling for Spend Down: The Atlantic Philanthropies
• Giving While Living: The Richard and Rhoda Goldman Fund and the Lewis B. and Dorothy Cullman Foundation
• Quick Spend Down: The Haigh-Scatena Foundation
• Raising the Payout: Evelyn and Walter Haas, Jr. Fund
• Giving 5.5%: The Lynde and Harry Bradley Foundation
• More than Investment Returns: The Needmor Fund
• Ramping Up: The HKH Foundation
• Using All the Models: Endswell Foundation / Renewal Partners
• A Different Strategy: Omidyar Network
• Conclusion
• Selected Bibliography
• Resources
• List of Profiled Foundations
• Acknowledgements

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