The AOL Time Warner Foundation will ditch its Dulles office, cut staff and overhead, and consolidate its operations in AOL Time Warner's New York headquarters by the end of June.

"We are moving all of the foundation's operations to New York over the coming months," says foundation spokesman Steve Sigmund. "The Dulles office for the foundation will be phased out."

Sigmund says some of the Dulles office's 10 to 15 employees will move to New York, some will be offered jobs at AOL Time Warner, and some will be laid off.

The foundation, says Sigmund, "will have a significantly smaller staff, working in New York."

He says the number of staff who will work at the restructured foundation has not been determined.

Though the foundation's decision may not have a huge personnel or fiscal impact on the D.C. area, its psychological impact could be huge. For now, however, members of the local philanthropic community will wait and see.

"What I understand is that they will continue to have a special commitment to the D.C. region," says Julie Rogers, president of the Meyer Foundation (http://www.meyerfoundation.org), one of the area's oldest philanthropic organizations.

"We have talked to them, and I'm confident that they'll continue to support us in the future," says Julie Chapman, acting president of Technology Works for Good (http://www.technologyworks.org), a group backed by the foundation. The group provides tech services and training to area nonprofit organizations.

Sigmund says that, as AOL's home, Washington will remain one of the foundation's "key cities."

"We will meet our existing commitments," Sigmund says. "The foundation will continue to have a close relationship with the Washington community."

The foundation, funded entirely by AOL Time Warner, makes about $10 million in grants each year.

"We're not overly concerned because we think there is a commitment to this region," says Terri Freeman, president of the Community Foundation (http://www.cfncr.org), an organization dedicated to quality-of-life improvements.

But it's clear that behind the optimistic appraisals, there is concern that the foundation's focus will shift away from the D.C. region.

"AOL Time Warner was starting to get really staffed up," Freeman says. "Those staff will be missed in terms of the body of knowledge that they carry around."

"I hope that it won't have a huge effect," says Kae Dakin, president of Washington Grantmakers and TouchDC.org, a Web site funded in part by foundation grants that helps people contribute money and volunteer time to area nonprofits. "It sounds like a huge change, but I think that some of the presence will be picked up by AOL Inc. and their marketing and communications department."

Dakin says AOL Time Warner Foundation President Kathy Bushkin has assured her that the foundation won't reduce its level of regional giving, reported by Washington Business Journal as $6.5 million in 2001. Bushkin could not be reached for comment.

"While they may not be as strong a presence as they once were," Chapman adds, "I would say they still are an active local player."

In fact, Chapman notes that the foundation (http://www.aoltimewarnerfoundation.org) recently gave Technology Works a "substantial grant."

Rogers is optimistic, but says it may be a while before the full impact of the foundation's move is known.

"In a way, we don't know yet," Rogers says. "AOL Time Warner staff have been very leader-like in the Washington community. … I hope that there will be ways to continue to work with them."

The foundation move is just the latest shakeup in AOL-land. There have been a number of signs that the $112 billion 2001 merger of Dulles-based AOL and New York-based Time Warner increasingly is seen by Time Warner executives as a mistake.

* In January, former AOL CEO Steve Case resigned as chairman of AOL Time Warner under pressure from shareholders and directors. Case's resignation capped a shift in AOL Time Warner's upper management ranks from former AOL executives to former Time Warner execs.

* Contributing to this shift is an accounting scandal involving the way the AOL unit accounted for revenue. The company has restated $190 million in revenue, and the Securities and Exchange Commission is investigating.

* AOL Time Warner last month reported a $98.2 billion loss for 2002, the biggest ever by a U.S. corporation. Much of that loss was attributed to the decline in value of the AOL unit.

* Beyond just getting rid of former AOL executives, folks at the AOL Time Warner corporate headquarters are reportedly mulling selling AOL off or at least dropping AOL from the company's name [see Technology column, page 20].

In light of AOL Time Warner's troubles, some in the local philanthropic community aren't shocked by the foundation's move.

"To some degree, it doesn't surprise me," says the Community Foundation's Freeman.

Says Dakin: "We understand that AOL Time Warner is having a tough time."