A Different View on Community Funds

To the Editor:

Over the past three years, the Foundation Strategy Group has consulted to community foundations across the country and interviewed dozens more to develop an understanding of best practices in the field. On the basis of our research, I must disagree with the way Emmett Carson framed the issue of community-focused versus donor-focused community foundations in his My View column (“Community Foundations Facing Crossroads,” May 16).

Casting this dichotomy as mutually exclusive distorts both the reality and the potential of community foundations. The primary role of a community foundation is to create value for its community. Gathering unrestricted assets is one means of creating value, and facilitating the contributions of individual donors is another. But so is building the capacity of nonprofits, creating public-private partnerships, teaching donors or financial advisers to be more effective philanthropists, researching needs, convening leaders, creating innovative community-wide initiatives, reducing transaction costs for smaller foundations, and countless other services that community foundations across the country can and do deliver, regardless of their balance between donor-advised and unrestricted assets.

Nowadays, handling donor-advised accounts has become inseparable from building unrestricted assets. Older foundations are fortunate to have inherited large pools of unrestricted assets, but newer foundations that seek to grow rapidly cannot ignore the preferences of today’s donors. Building relationships with donors through donor-advised accounts is often the best way to earn substantial unrestricted gifts in future years.

Ultimately, Mr. Carson’s argument rests on two false assumptions: that a donor-focused foundation can never influence its donors, and conversely, that a community-focused foundation always understands community needs.

On the contrary, community foundations often influence donor-advised contributors. No other organization is better positioned to educate individual donors and teach them how to become more effective philanthropists, which certainly benefits the broader community. Foundations have also used donor-advised contributions to create and fund their own innovative programs: The Peninsula Community Foundation raised more than $4-million from donor-advised accounts for its early-childhood literacy initiative.

It is equally wrong to assume that unrestricted funds always go to meet the needs of the community. Unfortunately, we have seen examples of community-focused foundations that are out of touch with their communities, funding programs that are no longer relevant or were designed without careful research and wide support. Donors, after all, are part of the community too, and donor-focused foundations have sometimes found that paying closer attention to their donors has taught them something about the real needs of their community.

Mr. Carson’s conclusion, that private foundations should support the growth and development of community foundations, is one I strongly endorse. But they must recognize the many roles a community foundation can play, and support those that create value for their communities effectively with the full range of tools and expertise at their disposal, rather than depend on a litmus test of their asset mix. And the most effective foundations will be those that listen and respond simultaneously to both their community and their donors.

Mark Kramer
Managing Director
Foundation Strategy Group
Boston

To the Editor:

Emmett Carson’s very thoughtful opinion piece couldn’t have been more timely or more to the point. As a recently elected board member of the Community Foundation of the Napa Valley, I fully appreciate and concur with his analysis and observations.

It seems to me that community foundations and local United Way organizations have landed in the same boat. Ever since United Ways started opening their doors to donor designations under market pressure, their unrestricted discretionary pot of money has been dwindling to the point that many United Ways are left with less than half of the total funds raised for distribution to the areas of greatest community needs. Donor designations — particularly to service agencies — have resulted in a “beauty contest.” The most visible and aggressive in their PR win. In theory these agencies sometimes may end up with even more money than they can use. The worthy but unpopular or invisible community groups are left to fend for themselves.

Another unintended consequence of a smaller discretionary pot is that United Ways are forced to curtail — if not completely abandon — their traditional community-building, community problem-solving and related activities, such as research and services planning, needs assessment, information and referral, volunteer bureaus, public-policy monitoring and influencing, etc. And United Ways that continue to conduct these community-building activities have to face a second whammy because these expenses are considered — albeit mistakenly — administrative expenses.

Small and emerging community foundations are faced with survival and sustainability issues because some are hard pressed to meet their operating expenses. The competition from commercial gift funds forces them to keep their fees to the minimum. Donor focus has resulted in 80 to 90 percent of the foundation’s total assets in “donor-advised” funds and maybe 10 to 20 percent in permanent endowments.

As Mr. Carson has rightly pointed out, national private foundations and even some well-endowed family foundations need to play a leadership role in alleviating this situation.

Both local United Ways and community foundations need to revisit their mission and role in the community. Who is the customer? What is their raison d’être? It would indeed be a sad day for our country if United Ways and community foundations were to succumb to the competition from commercial gift funds and assume the role of mere philanthropic intermediaries or middlepersons.

Russy D. Sumariwalla
President
Global Philanthropy & Nonprofits
St. Helena, Calif.

To the Editor:

The dichotomy Emmett Carson draws between “donor-focused” foundations and “community-focused” foundations does not need to be so stark and divisive. Community foundations can focus on donors, not for the ultimate goal of unrestricted funds, but to engage them and their families in effective and efficient philanthropy. In other words, to make them “raging philanthropists,” a term we are fond of at the Community Foundation for Greater Atlanta.

Over the past 15 years community foundations have learned to listen to community groups, not tell them what their needs are and how they can be addressed. These same practices of “community building” can and should be applied to donors. They too have a richness of experience, interest, and knowledge that they bring to the table.

In addition to providing funds, our role as community foundations is as a validator, connector, and information resource. We meet donors and grantees where they are, and proceed with them in their quest to grow and do more. In this way community foundations use their unique position not only to build community in general, but also to build a community of donors. The idea is to leverage resources to address community needs, without dwelling on whether the funds are discretionary or donor-advised. This results in a permanent asset for our community and markedly differentiates us from the commercial gift funds.

Alicia Philipp
President
Community Foundation for Greater Atlanta
Atlanta