The Fannie Mae Foundation, one of the District's largest charitable donors, said yesterday that it is cutting its budget by more than a fifth, closing offices in Atlanta and Chicago, and laying off a dozen employees. But the foundation said it is not reducing its philanthropy in the Washington area.
The cuts are largely the result of an accounting scandal at Fannie Mae that has battered the company's stock price, driven out top executives and erased billions of dollars of previously reported profit. The foundation relies on the federally chartered mortgage finance company for its funding.
"They're having to cut costs, and so we have to cut costs," said foundation spokeswoman Beverly Barnes. A spokeswoman for the company, Janice Walker, declined to say what level of future support Fannie Mae will provide the foundation.
Foundation employees were told of the cuts yesterday. The foundation board, which is led by Daniel H. Mudd, interim chief executive of Fannie Mae, decided Tuesday night to cut the foundation's budget for this year to about $72 million from about $92 million, the foundation said.
Details of the spending cuts have not been worked out, but some will involve an advertising campaign that the foundation was already planning to end this year, Barnes said. The advertising, once a function of the company, publicized the availability of brochures with information for prospective home buyers.
The foundation said it will honor all past commitments, including multiyear grants, and will resume accepting grant applications once it has revised its spending plans.
Last year, the foundation provided $24.1 million in funding for the Washington area, much of it directed at housing and help for the homeless.
"The board was very clear that the foundation should maintain our grant and program spending for metropolitan D.C. at the same level as 2004," Barnes said.
The staff will be reduced to 75 people from 87, with all but one of the layoffs here, Barnes said. None of the foundation's senior managers are losing their jobs, Barnes said.
However, an independent consultant will review compensation levels for top foundation executives based on the foundation's reduced operations, Barnes said. That could result in cuts of up to 20 percent in compensation and benefits for top executives, the foundation said.
In 2003, the foundation paid chief executive Stacey D. Stewart $514,633, plus $68,686 in benefits and deferred compensation, according to the foundation's most recent publicly available tax return.
"The measures announced today will help us to prudently manage our assets while we maintain our role as a strong community partner and advocate for affordable homes," Stewart said in a statement.
"I'm extremely pleased that they have maintained their funding for Washington, D.C.," said Oramenta F. Newsome, director of the District office of Local Initiatives Support Corp., one of the foundation's biggest grant recipients. "We really need them in Washington, D.C."
D.C. Mayor Anthony A. Williams (D) "is hopeful that by next year some of the financial difficulties encountered by the parent company will have been resolved to a certain extent so that the foundation . . . can maintain its strong commitment to the city," mayoral spokeswoman Sharon Gang said.
Regulators have alleged that Fannie Mae systematically violated accounting rules. As a result of improper accounting one year, several executives received millions of dollars of bonuses pegged to the company's financial performance, regulators alleged.
The accounting problems left Fannie Mae with less capital than it is required to maintain, and during its effort to dig out of the hole, Fannie has abandoned plans to be an anchor tenant in a Southwest Washington redevelopment project, stalling the development.