Like most other institutions whose sole source of income is their endowment, the Fund has found it necessary to reduce its spending plans to adjust to the current market realities. After a reduction of 10 percent in 2003-04, it expects to maintain an essentially flat budget over the next five years. The Fund is fortunate in being able to maintain this level of spending, which allows continuation of all major grants programs.

As a value-adding foundation, the Fund seeks to achieve an optimal balance between its grantmaking and intramural research and program management activities, while minimizing purely administrative costs. Recognizing that data on expenditures reported in the Internal Revenue Service 990PF annual tax return inadequately reflect the purpose of many expenditures, the analysis in the figure sorts out the foundation's 2004-05 expenditures according to four categories recommended by the Foundation Financial Officers Group: direct public benefit activities (extramural grants and intramurally conducted programs such as research, communications, and fellowships); grantmaking activities, including grants management; general and administrative activities; and intramural investment management. In 2004-05, the Fund's total direct public benefits activities accounted for 80 percent of its annual expenditures. Value-adding oversight of grants took up 12 percent of the Fund's budget, and the intramural costs of managing the endowment, 2 percent. Appropriately defined, the Fund's administrative costs amounted to 6 percent of its budget.

In a constrained fiscal environment, the Fund remained extraordinarily productive over the last year, while achieving intramural cost savings that enabled staying well within the policy guideline set by the Board of Directors for the ratio of extramural (60 percent minimum) to intramural spending (40 percent maximum). The Fund's earlier shift from mail/paper to electronic distribution of the results of its work and that of grantees, along with a major upgrade of its Web site, accounted for much of the savings achieved on intramural costs. The foundation's ability to take on new initiatives while maintaining all grants programs and the intramural capacities that ensure their effectiveness will enable it to continue to fulfill a unique and highly productive role in American society.