Facing Up to Spending Down

March 8, 2011

"Depend upon it, Sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." —Samuel Johnson, as reported by James Boswell in Life of Johnson.
With the publication of the second annual report on spend-down at the AVI CHAI Foundation, Tony Proscio and I have had the opportunity to reflect on some of the lessons that we, as well as the trustees and staff at AVI CHAI, have learned over the first two years of the project.
Foundations dedicate themselves to achieving impact in society. Maximizing some social good, however defined, that can be achieved by the resources at the foundation’s disposal is the reason for being of any foundation.
The problem is that many foundations, including many staffed, professional foundations, don’t do the things they need to do to get the most impact out of the money they have available to spend.
Giving away money is easy. Giving away money in a way that produces the best possible results is hard—extremely hard. It takes dedication, perseverance, careful, precise thought, and a single-minded, laserlike focus on defining and measuring anticipated and actual results. These are all difficult tasks. Many people—maybe even most people—will avoid taking on difficult tasks unless there’s some irresistible force requiring them to do so.
For spend-down foundations, that irresistible force is time. To paraphrase Dr. Johnson, the imperative to spend all of a foundation’s money in a limited period of time concentrates the mind wonderfully.
Yet even at spend-down foundations, there is clear evidence of a reluctance to grapple in a timely manner with the urgency of what the foundation must accomplish both internally and with respect to those external organizations to which it is giving money. Both Tony Proscio, who is documenting the spend-down process by the Atlantic Philanthropies, and I in my work with AVI CHAI have found this to be true.
Perhaps the most easily understood example of this reluctance centers on what spend-down foundations must do to strengthen the capacities of their grantees to survive and thrive after the flow of funds from the spend-down foundation ends. Spend-down foundations should increase their recipient organizations' capacity to raise money from other foundations and donors. Spend-down foundations should also increase their grantees' capacity to create and build governing boards made up of individuals who can drive and make successful the fund-raising process as well as perform all of the other duties that boards must undertake if the organizations they govern are to thrive. Spend-down foundations should get those things done in time for the organizations involved to learn how to raise money and nurture governing boards on their own, and to gain experience—and confidence—in succeeding at both those tasks. These things cannot happen instantly; it takes several years at least. And fund-raising and board creation are only two of the processes that need to be put in place before the spend-down foundation turns off the lights.
It was Augustine of Hippo who, while still enjoying his misspent youth, famously prayed: “Make me chaste and pure—but not yet!” Likewise, spend-down foundations are tempted to say: “Maximize my impact and effectiveness—but not yet!”
For St. Augustine the day eventually came that he renounced iniquity. “Not yet!” became “Now!” For spend-down foundations that wish to produce lasting impact, the day always comes when they can no longer say “Not yet!” They must accede to the “Now!” of the relentlessly approaching sunset date.
To learn more about the Center's project on spend-down, including links to a library of online documents relating to spend-down and a list of spend-down foundationsclick here.

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