New Organization to Help Community Foundations

A group of community-foundation leaders has formed a new organization that they say is intended to meet the unique needs of their funds. The move comes after years of complaints among members of the Council on Foundations — a Washington association that serves a variety of grant makers — that the council has not done enough to support community funds.

The new group is particularly interested in developing a national marketing and fund-raising strategy to help community foundations compete for donors against funds that have been created during the last decade by banks and investment companies, most notably Fidelity Investments.

But some community-foundation officials worry that the new group may disrupt and duplicate efforts within the council to improve its services.

“My passion has been to help the field stay together as a field,” says Diana R. Sieger, president of the Grand Rapids Foundation, in Michigan, and head of the council’s Committee on Community Foundations. “My concern is that we respect and honor one another’s activities and work together and not try to reinvent the wheel.”

Founders of the new group — top officials from 16 community foundations around the country — insist, however, that the organization’s efforts will go beyond the work of the council, and not compete with it.

The new organization, called Community Foundations of America, plans to create a “brand identity” for community funds around the country to help attract donors and build allegiance to the local groups on a national level. Among other things, it also plans to beef up the funds’ presence on the Internet and to offer special services at a discounted price, such as group-insurance plans.

“We have all beat up on the council in the past for not doing certain things for community foundations,” says Gid H. Smith, president of the Community Foundation of Greater Memphis, who is chairman of the new group. “But now we understand that it’s not their job to do so.”

For example, Mr. Smith says, community foundations — the only members of the council that raise money — should not expect the council to meet their special marketing and fund-raising needs.

Community foundations solicit gifts from many different donors, usually within a specific geographic region, to build a permanent endowment to benefit local charities. Other grant makers that belong to the council, such as private and corporate foundations, typically derive their money from a single source such as an individual, family, or company.

The distinct challenges faced by community foundations to attract donors have been underscored by the spectacular success of tax-exempt gift funds set up by banks and investment companies. The funds, which have been heavily promoted as a kind of charitable checking account, are considered to be head-to-head competitors with community foundations that offer their own gift funds, known as donor-advised funds. Both types of funds enable donors to turn over cash or appreciated assets, claim a charitable deduction, then recommend how, when, and to which charities to distribute the money.

Many leaders of community foundations have been dissatisfied with the council’s response to their for-profit competitors. Some believe that the council did not do enough to demonstrate to members of Congress, federal regulators, and the public that the commercially run funds may be different enough from the community-foundation funds to warrant less-favorable tax treatment.

Many more community-foundation officials say that the council has done little to help them compete with commercial gift funds, such as promote the local grant makers nationally.

That dissatisfaction among the council’s community-foundation members has led to changes at the organization. It recently added to its general counsel’s office an attorney who focuses on community-foundation issues, and it plans to hire a new community-foundation director who will be, for the first time, a part of the council’s top executive team. A newly redesigned department for government and media relations is expected to focus attention on legislative issues relevant to community foundations, and the council expects next year to introduce a new Web site dedicated to community funds.

At the center of the changes at the council is a more prominent role for the organization’s community-foundation panel. Long considered an advisory board, the committee is taking on a greater leadership role and plans to encourage, coordinate, and support efforts — such as the creation of a set of community-foundation standards — intended to benefit grant makers around the country.

“There’s a whole lot of change going on inside the council, a whole new way of doing business, and a shift in philosophy to be oriented much more as a membership-service organization,” says Ms. Sieger, head of the community-foundation panel. “My concern with this new group is that they haven’t given the efforts within the council the opportunity, the time needed to go forward.”

Ms. Sieger points out, for example, that the council’s panel has been testing a marketing strategy in Michigan that it plans to roll out nationally next year.

Mr. Smith of Greater Memphis says that the new group plans to work with the council and will not duplicate its activities. He emphasizes that his foundation and others will remain as council members, and that he will even retain his seat on the council’s community-foundation panel.

A letter sent last week to community funds around the country alerting them to the creation of Community Foundations of America rejects the notion that the new organization is “a breakaway group” from the Council on Foundations.

“The creation of CFA is not about the council,” the letter states, noting that the council offers many beneficial services. “CFA is being created to do those things that community foundations can and should do for themselves.”

The group’s first-year budget — $350,000 — will be covered by the founding funds. After that, the group plans to rely on revenue from services and products — such as software — that it plans to offer, some private-foundation money for specific projects, and membership dues. The dues have not yet been set, but Mr. Smith says they will be as low as possible so that community foundations that already belong to other membership organizations can afford to join.

Dorothy S. Ridings, president of the Council on Foundations, says she is not worried that the new group will siphon members from the council or detract from the council’s plans to do more for community foundations.

“This doesn’t indicate to me any reason to shift gears,” she says, adding: “There’s an enormous number of needs by community foundations right now and a whole bunch of ways to address them.”