2 of Every 3 Big Foundations to Trim Grants This Year, Study Finds

Nearly two-thirds of large American grant makers anticipate reducing the number of grants they award this year, the size of their grants, or both, according to a report to be released this week by the Foundation Center, in New York.

And as foundations cope with a sharp decline in assets caused by the nation’s financial crisis, the coming months will be “a particularly challenging time” for grant seekers, says the report. Forty-six percent of foundations expect to reduce the number of new grantees they support, leading to a potential lack of critical funds for emerging nonprofit groups.

At the same time, 43 percent of grant makers expect to slash the overall number of groups they support this year, affecting all types of organizations, while 44 percent anticipate making fewer multiple-year awards, taking a “wait and see” approach.

“Grantees with existing foundation relationships have already begun receiving smaller awards and rejection notices citing the impact of the economic crisis,” says the report.

Responses to the survey came from 1,243 of the wealthiest private, community, and corporate foundations in the United States.

Four out of five foundations said that they plan to hew to their current grant-making programs, and 94 percent intend to maintain or expand the geographic areas they serve. The report says that those responses are consistent with Foundation Center findings during the last recession, in 2000-2.

All told, 168 foundations — or 14 percent of the total — reported that they were responding directly to the cash crunch facing charities by making emergency or “exceptional” grants, creating special programs, or offering loans and other program-related investments.

A ‘Vigorous Response’

The report says that community foundations are “mounting a particularly vigorous response” to the economic crunch, with 35 percent of such funds saying they were undertaking special efforts to help the regions they serve deal with homelessness, hunger, and other effects of the recession. The survey also found that foundations that make grants of $10-million or more annually were more prone than their smaller peers to be stepping up support in response to the crisis.

Many foundations continue to experiment with how best to use their resources to support their grant making, says the report.

Some things have remained fairly constant: Just as in a “typical year,” with lessextreme financial conditions, for example, 88 percent of respondents said they plan to use investment income to finance their 2009 grants budgets.

But the survey also found that nearly two out of five foundations — 39 percent — expect to dip into their endowment principal in order to make grants. Private funds were the most likely to say they would do so (43 percent), while community foundations were the least likely to do so (5 percent).

And, in these tight times, 54 percent of foundations said that they are exploring ways to meet organizational goals by using resources that don’t involve grant dollars. Of that pool, two-thirds plan to pursue more collaborations and partnerships this year, while approximately one-third said that they plan to hold more meetings with grantees and peers.

Among other findings from the new report:

• Of those foundations that said they have made “exceptional commitments,” almost 50 percent said that they did so exclusively by reallocating money from existing grant programs.

• Grant makers are looking to other sources beyond their endowments in order to meet their projected grants budgets, including soliciting gifts and bequests from donors (17 percent of respondents), using discretionary funds (13 percent), and dipping into reserve funds (9 percent).

• Roughly one-third of grant makers said they had made internal adjustments as a result of the 2000-2 economic downturn that have left them better prepared to cope with the current doldrums.

The Foundation Center report, “Foundations Address the Impact of the Economic Crisis,” is available on its Web site.