Pioneering a New Direction

Community fund advises both charities and donors

When the Greater Green Bay Habitat for Humanity set out to raise $1.25-million to help build 50 houses over

the next five years, it hired a fund-raising consultant to help with the campaign.

During one of the charity’s planning meetings, the consultant, Kenneth D. Strmiska, was asked by a Habitat board member whether Schreiber Foods was likely to come through with a $100,000 donation.

Mr. Strmiska, it turns out, had a pretty good idea of what Schreiber — a local company and the nation’s largest processor of private-label cheese — was likely to do. That’s because the consulting was part of his job as president of the Greater Green Bay Community Foundation, whose assets total $62-million, and Mr. Strmiska and other staff members were working with Schreiber to help plan its giving.

In addition to helping donors, Mr. Strmiska estimates that he and another member of his staff spent nearly half their time during the past year advising local charities on how to raise money and plan for their future. The consulting fees for such services — while low compared with those charged by most for-profit consultants — cover nearly 15 percent of the foundation’s $400,000 annual budget.

It is an unusual role for a community foundation, and one that elicits mixed reactions from philanthropy experts. On the one hand, the foundation’s work can be seen as blatant “double dipping” — it is being paid by charities to raise money at the same time that it is being paid by donors for advice on how to give money away.

Spreading the Idea

But the experiment here in Green Bay, which has a metropolitan area of about 225,000 people, also comes at a time of national hand-wringing among community foundations, who know they must differentiate themselves from businesses that provide donor-advised funds, such as Fidelity Investments. Donor-advised funds, the primary revenue source for most community foundations, allow people to set aside money in a special fund, claim a charitable tax deduction, and then help direct the money to charities they choose.

Interest in the consulting idea helped prompt the Council on Foundations, in Washington, to hire Mr. Strmiska as its managing director for community-foundation services, a role in which he can share lessons from Green Bay. He starts the new job this month.

Mr. Strmiska sees community foundations as “knowledge brokers,” with good information about both charities’ needs and donors’ interests. He says it is logical for community foundations to work with both parties, rather than spend nearly all their time raising money — an approach that many philanthropy experts believe is a road to ruin for community foundations, given that commercial operations like Fidelity have a cost edge in managing money and distributing gifts.

The foundation’s consulting work has helped local charities raise $30-million, and Mr. Strmiska estimates that the low prices charged for the consulting work have saved the same charities as much as $2-million over what they would have paid a private consulting firm.

“We’re at the messy crossroads between ideas and funding,” Mr. Strmiska says. “We’re doing people a disservice if we don’t use that to help.”

He believes the potential conflicts of interest aren’t a problem, provided foundation officials disclose information — or keep their mouths shut — as ethics dictate. When the Habitat board member asked about Schreiber Foods, Mr. Strmiska demurred.

“Like a clergy member,” he says later, “you’ve got to know what you can divulge, and what you can’t.”

Competitive Strategy

To compete with commercial providers like Fidelity and Vanguard, experts say, community foundations have two choices. They must either drive down their costs to match or beat the commercial entities on price — a dubious proposition given the economies of scale that the national providers enjoy — or provide a more comprehensive service to local residents that donors can recognize as meaningfully different.

“Fidelity provides a great service to the field for those who want a philanthropic checking account,” says John Kania, a managing director of FSG Social Impact Advisors, a nonprofit organization in Boston that provides strategic-planning assistance and research to charities and foundations. “Fidelity hasn’t done a great job in helping donors understand that they’re more than just a philanthropic checking account.”

Mr. Kania sees the Green Bay consulting work as an interesting way for the community foundation to increase its revenue and to make a difference, provided the foundation is clear with donors about which charities it is working with. Several community foundations provide group training and workshops for charities in their area, but Mr. Kania and other experts were not aware of other community foundations charging fees for one-on-one consulting work, as the Greater Green Bay Community Foundation does.

“It’s entrepreneurial, it’s innovative, and it’s certainly in line with their mission,” Mr. Kania says.

But Lucy Bernholz, founder of Blueprint Research & Design, a consulting firm in San Francisco that serves foundations, says the consulting work presents conflicts of interest that she considers “too close for comfort.”

“You’re setting up a dynamic by which a nonprofit could expect that if it pays for this advice, it gets a grant,” she says.

On the same day as the meeting with Habitat, Mr. Strmiska met with the executive director and several board members from CASA of Brown County. (CASA stands for Court Appointed Special Advocates.) The charity, which pairs volunteers with abused and neglected children, is losing financial support from its national organization, and turned to the community foundation for help in raising $80,000.

CASA’s first campaign gift — a $5,000 check — came from none other than the Greater Green Bay Community Foundation. During the meeting, CASA’s board chairwoman effusively thanked Mr. Strmiska.

Mr. Strmiska grimaced. He explained that a separate board makes the grant decisions. “I had nothing to do with it,” he said.

Fund-Raising Success

The Greater Green Bay Community Foundation was founded in 1991 and plodded along with modest growth until 1998, when the founders decided they wanted more-professional management. They tapped Mr. Strmiska, who grew up in rural Wisconsin and earned a doctorate in educational administration, with a focus on philanthropy and fund raising, from North Carolina State University. He had most recently been development director of the United Arts Council, in Greensboro, N.C.

The community foundation, whose small office suite is tucked away on the third floor of the downtown M&I Bank building, had only $15-million in assets at the time — a small percentage of which was unrestricted. Its average grant was less than $5,000. “We weren’t going to become a community player based on our grant making,” Mr. Strmiska says.

Shortly after he arrived, he attended a meeting organized by a group that wanted to restore Green Bay’s historic Meyer Theatre. “I blurted out, ‘I’m a fund raiser, I could help lead the fund-raising campaign,’” Mr. Strmiska says.

The campaign he headed raised $5.2-million to restore the theater, which each season features a wide range of live performances, like a Bruce Hornsby concert and Shakespearean plays.

That experience gave Mr. Strmiska a reputation as a local fund-raising expert, and local officials turned to him for help raising money for a skate park, a public swimming pool, and an ice rink.

The community foundation began charging for its services in 2004. Mr. Strmiska needed a way to limit the projects he committed to, and he knew the foundation could use the extra revenue. The downturn in the stock market that began in 2000 had reduced the revenue the foundation received for overseeing funds.

The foundation charges relatively low administration fees of 70 basis points, or seven-tenths of 1 percent, on its donor-advised funds (investment-management fees typically add another seven-tenths of 1 percent), and its board didn’t want to raise fees, or compete with charities by seeking donations for annual support.

The board had vigorous debates about whether it should begin offering fee-for-service consulting. About 80 percent of the board wanted to move ahead with the idea. Others worried that the plan would undermine the foundation’s credibility with donors.

“Our donors are our lifeblood,” says Jeffrey M. Ottum, a retired executive from Schreiber Foods who chairs the community foundation’s board and supports the consulting work. “We can’t ever get confused about that.”

More than two years after the foundation started offering consulting services, the board remains firmly committed to it. With Mr. Strmiska’s departure to Washington and the Council on Foundations, Martha Ahrendt, vice president for programs and development — who along with Mr. Strmiska handled most of the consulting work — will become Green Bay’s interim president.

“We are absolutely going to continue this,” Mr. Ottum says of the consulting work. “We recognize the value this has for us and for the community.”

Consulting Fees

Mr. Strmiska estimates that the foundation charges only about a fifth as much as a for-profit consultant. For its work on Habitat for Humanity’s campaign, for example, the foundation will receive about $12,000.

Such charges barely cover the foundation’s costs for providing the work, but the foundation benefits in other ways. Some of the charities it works with have endowment or reserve funds at the foundation, and as they enjoy more fund-raising success, their funds at the community foundation should grow.

More important, the consulting work has brought foundation officials in contact with some of Green Bay’s wealthiest donors as they work on projects together. The work has allowed Mr. Strmiska and others to build rapport with those philanthropists through “natural conversations” rather than strained fund-raising calls.

Mr. Strmiska estimates that about $5-million of the foundation’s $62-million in assets were placed with the foundation in part due to the relationships developed while working on campaigns for charities.

“These folks are out trading in their knowledge and awareness, and matching donors with charities,” says Jack Meng, chairman and former president of Schreiber Foods, who helped start the community foundation. “That allows people to develop confidence in the foundation, and the more confidence they develop, the more likely they will be to leave their assets to the foundation.”

Mr. Meng and his wife, Engrid, have $10-million in a private foundation, and he says they may establish a fund of similar size with the community foundation, because of both the confidence he has developed in its leadership and the increased flexibility in annual grant making that the community-foundation structure allows.

Mr. Strmiska says the relationships he developed could lead to even bigger gifts through bequests, as several prominent area donors have told him they intend to leave money to the community foundation. “We won’t know for 15 to 20 years what the ultimate impact of our decision to engage in consulting work will be,” he says.

‘Open Doors’

In each fund-raising campaign that Mr. Strmiska worked on, he says, he would ask two to four people who had donor-advised funds at the community foundation if they would like to contribute to the charity.

That is one aspect of the arrangement that certainly appeals to charities. Neighborhood Housing Services of Green Bay, which provides home-buying education and counseling, has hired the community foundation for assistance in raising $1.8-million for a new home-ownership center.

“They can open doors,” says Noel Halvorsen, the charity’s executive director. “If you trust him enough to put some of your wealth there, and then he calls and says, ‘I think these guys are a good investment for you,’ that can go a long way.”

Lynette P. Green, executive director of Greater Green Bay Habitat for Humanity, says Mr. Strmiska has given her good advice on whether she could first approach certain donors via the mail, or whether it was imperative to be face to face from the first contact.

“He has such a great understanding of the major philanthropists in the area,” Ms. Green says.

Mr. Strmiska says he disclosed all consulting arrangements to donors, and that he made no promises to charities that hired the foundation.

“We’re not rainmakers,” he says. “Coming with us doesn’t mean that we’re going to open up a philanthropic channel of dollars.”

Meanwhile, charities in turmoil might stay away from the community foundation’s services, fearing that community-fund staff members would share the dirty laundry with the fund’s donors.

“Do we have an obligation to tell our donor-advised clients when we learn something?” Mr. Strmiska asks. “Yes, we do. Has it hurt us in getting business? I’m not sure.”

One charity abruptly ended its fund-raising contract with the community foundation. Officials didn’t want to share the group’s list of donors with Mr. Strmiska, fearing that he would try to woo the donors into putting all their philanthropic dollars into the community foundation.

Given the community foundation’s low fees, its employees don’t do everything that a fund-raising consultant might. Mr. Strmiska, for example, says he wouldn’t pester members of fund-raising committees to make their calls.

The arrangement can have its downsides.

At a meeting arranged for Mr. Strmiska with Habitat’s 11- member board to discuss the campaign, only the executive director and the head of the board’s fund-raising committee showed up.

“If Habitat had brought in a high-priced consultant,” Mr. Strmiska said as he drove away from the charity’s offices, “you know that meeting would have been well attended.”

HOW ASSETS HAVE GROWN AT GREEN BAY’S COMMUNITY FOUNDATION (in millions) 1995 $8.6 1996 $10.2 1997 $14.9 1998 $22.4 1999 $29.2 2000 $38.1 2001 $39.3 2002 $37.4 2003 $37.5 2004 $43.0 2005 $53.4 2006 $62.0 SOURCE: Greater Green Bay Community Foundation