From early on, Diane and some of her siblings believed strongly that FACT should have a limited life. “We did not want our foundation to exist in perpetuity, though that is a very personal decision for each family to make,” she said. “I just don’t see a need for tens of thousands of family foundations giving away small amounts of money to exist in perpetuity. New foundations emerge every day and those in existence today have a responsibility to be as strategic and impactful as possible. Closing your foundation in five or ten years really forces you to be strategic about your grant making and look at your overall results. I felt that we would have much more impact as a $4 million a year foundation than as a $2 million foundation – we could certainly bring more money to the groups and more influence to the table when partnering with other foundations.”
The family discussed the issue regularly at board meetings. FACT had never adhered to a particular payout percentage, but rather set a budget to meet its programmatic priorities. Although it was headquartered in Bermuda, and thus not subject to the U.S. rule that it pay out at least 5 percent of its net assets each year on grants and operations, it had always paid out more than that minimum on grants alone. In 1999, for example, FACT’s grants represented 7.86 percent of its beginning net assets. And by adding the new capacity building programs in mid-2003 without cutting the regular grants budget, FACT was increasing the percentage to 8 or 9 percent, making spend-out a likely outcome. Thus, in 2004 the trustees decided to formally proceed with a spend-out plan. At that time, they decided to close the foundation by 2020; however, the economic downturn in 2008 speeded up the timetable to 2012. The program in France was closed in 2012 as well.
Discussions about spending out included debates about whether it might be better to continue the foundation in order to bring in the next generation. Ultimately, the family decided that FACT should be the work of a single generation. “It was created by our parents, and we wanted to honor them, and our mother’s involvement, by giving away as much money as possible, in a targeted way, in this time frame while we were all in relative agreement,” Diane said.
The official decision to spend out pushed the trustees to think strategically about how to use the foundation’s last years to greatest effect. How could its funds have the most impact? How could it help its grantees, who would be left without an important source of operating funds? What legacy would FACT leave behind?
The trustees felt that it was crucial that the grantees have plenty of lead time to prepare for FACT’s exit, so in 2007 the staff began informing the groups of FACT’s plans to close. Operating grants would remain consistent for the next few years. In 2011 and 2012, the final years of operation, the operating grants would be tapered off. Capacity building funds would be available through 2012.
Since much of FACT’s program was geared towards strengthening organizations, the foundation determined that significant, targeted assistance with fundraising would be a priority in FACT’s last two years. The idea was not only to help the groups replace FACT’s general operating support grants, but also to help them diversify their funding in general, as most local community-led organizing groups are heavily dependent on foundations. This Fundraising Assistance Project provided $1.3 million in grants, as well as webinar trainings and consulting assistance.
There are few examples of how a foundation should spend out in a responsible and responsive way. Following in the footsteps of the Beldon Fund (www.beldon.org), FACT set out to model how a foundation could exit the field in a thoughtful manner. The foundation hopes that its process will serve as an example for other foundations who seek to follow alternatives to perpetuity. Diane also helped create an informal working group of over a dozen foundations in the process of spending out to share information and experiences on closing a foundation. For more information on this group, the Spend Down Working Group (SDWG), please email her at email@example.com.