How Foundations Cope with the Economic Crisis

Earlier this month, we commented on an article that describes how private foundations serve as a source of funds for research, particularly family foundations that focus on specific diseases. Last week, a study released by the Foundation Center tells how private foundations are able to keep going during these tough times.

The Foundation Center surveyed some 5,000 private American foundations earlier this year and got more than 1,200 responses. The findings show the recession hitting foundations hard: Nearly two-third (63%) of the respondents expect to reduce the number of grants they award, with nearly half (44%) anticipating a reduction in multi-year grants, the kind often awarded for research. Larger foundations--those giving $10 million a year or more--are not cutting back quite as much as the smaller funders. About 4 in 10 of the larger foundations are reducing the total number of grants and the number of multi-year grants.
The good news is the vast majority of foundations (8 in 10) intend to maintain their programs, albeit at lower levels.  The study shows that despite the cutbacks, foundations are taking bold--and some might say risky--steps to keep their programs going. Nearly 4 in 10 foundations (39%) expect to dip into their endowments for grantmaking; in a typical year foundations use the investment income from those endowments to fund their grants, preserving or increasing their endowments.  A few foundations expect to make up some of the shortfall through new gifts from donors (17%), and by dipping into discretionary funds (13%) or reserve funds (9%).
Coping with the crisis means finding ways of achieving their missions in ways other than handing out money. About a third (32%) of the respondents, and nearly half (44%) of the larger foundations, say they had made changes in their operations to enable them to weather the current storm.  One of those strategies is a shift to non-grant activity. More than half (54%) of the respondents say they are engaging in more non-grant projects as a result of the economic crisis, such as partnerships and collaborations, and advocacy.
Another survival strategy, as one would expect, is cutting costs. Nearly 1 in 10 foundations say they cut staff and other administrative expenses.