Considering the argument it suggests the following
In wake of federal cuts --> pattern of scientific grants awarded by foundations is changing --> unwilling to fund risky projects --> started funding relatively conservative projects
(A) Foundations were being forced to recognize that they could be more effective by granting smaller amount of money to a greater number of projects.
--> Projects can be chosen by Foundations hence not relevant
(B) The decision–makers at foundations tended to be more politically conservative.
--> This contradicts the fact that the Foundations supported risky projects earlier
(C) Foundations had less money available to support worthwhile projects because of the rising costs of other activities
--> Not mentioned in the argument.
(D) Foundations were increasingly allowing decisions about which projects to fund to be based on a reluctance t see projects they supported fail.
--> Correct. The possible reason for shifting to conservative projects this year could be based on the project's success. This might not have been a consideration last year as funding was available.(E) Those programs that were more innovative than the ones funded by foundations were supported by the limited federal funds that were still available.
--> Doesn't suggest what made the difference in the approach of foundations this year basis the fund cut
IMHO Option D