Let’s Collaborate With Commercial Funds, Not Compete

During this time of rapid growth of private philanthropy, it is appropriate that the Council on Foundations — the organization that represents 2,000 of the nation’s grant makers — is taking steps to encourage giving, establish standards of practice, and ensure that foundations can operate in a supportive and evenhanded regulatory environment.

The council’s main goal is to be a national voice on issues important to private and family foundations, community foundations, and corporate-giving programs.

To accomplish its aims, the council puts a great deal of emphasis on gathering key players to discuss important issues. Part of that work entails deciding who gets to join the council itself — with the assumption that the organization’s members receive support and guidance to maximize their effectiveness, develop strong and consistent messages designed to influence public policy, and benefit from the give-and-take that comes from relationships with colleagues.

The council had for some time been wrestling with one aspect of its membership policies that has produced considerable discussion among foundations, particularly among community foundations: whether to allow the national donor- advised funds (sometimes referred to as commercial gift funds), such as the Fidelity Charitable Gift Fund and the Schwab Fund for Charitable Giving, to be full members of the council, if they choose to apply.

To many in the community-foundation world, the idea that such organizations — driven primarily by business interests rather than philanthropic ones — should belong to the council seems inconsistent with the mission of representing charitable institutions. They note that such funds operate closely under the umbrella of their parent corporations, and while they have charity status, they are not at their core charitable organizations.

In addition to a difference in mission, many community foundations see themselves as competing with the commercial funds for contributions, so that is another reason that the debate over this issue is tricky.

However, what commercial funds share with community foundations and other charities far outweighs any differences between “us” and “them.” And by allowing those funds to share the umbrella of the Council on Foundations, we will all benefit, including, most importantly, the communities and people that grant makers serve.

The importance of the national donor-advised funds in the philanthropic marketplace is considerable. It is well known that these funds have been among the fastest-growing areas of philanthropy since they were started. For the 2005 fiscal year, the assets held collectively by the five largest national donor-advised funds surpassed $75-billion, according to The Chronicle’s latest survey. Fidelity is the largest, at $3.05-billion, with more than 34,000 funds.

And looking at amounts distributed to charities during that year, donors who have accounts at these national funds allocated more than $1.1-billion from their individual donor-advised funds.

These numbers are strong evidence of the national donor- advised funds’ ability to do what community foundations and other charities do as an essential part of their own missions — encourage and facilitate charitable giving.

Beyond the numbers, companies like Fidelity and Schwab have popularized the notion of donor- advised funds — through extensive national marketing efforts — in ways that charities, including community foundations, could not have done on their own.

And even as community foundations may wince at how often the news media refer to donor-advised funds offered by the national commercial organizations, community foundations have undoubtedly benefited from the publicity given both to individual giving and the benefits and availability of donor-advised funds.

In effect, the national, commercially sponsored funds have helped turn the donor-advised funds they offer — as well as the ones offered by community foundations and other nonprofit groups — into household words, at least in high-net-worth households.

The national donor-advised funds, in part due to the budgets of their parent companies, have also raised the bar on how many community foundations do business — certainly one benefit of healthy competition.

Not only have community foundations increased their marketing, in large part as a reaction to the marketing of the national funds, but many community foundations also have significantly improved their technological capacities to match the online functions offered by these funds.

To be sure, some people in the community-foundation world are concerned about the fact that the roots of the national donor-advised funds may well be embedded in the corporate strategies of their parent companies, but where does one draw the line between what is widely considered the legitimate and important work of corporate-giving programs and the activities of the national donor-advised funds?

While many people both within and outside the world of philanthropy view corporate giving as motivated in part by the bottom line, these activities nevertheless are rightly embraced by the Council on Foundations. The council clearly wants to focus on the opportunity to increase the quantity, quality, and impact of corporate grant making rather than struggle to figure out nuances about motivation.

Donor-advised funds have quickly become, like community foundations, key facilitators of personal giving — and we should benefit from each other’s experiences, ways of doing business, and resources.

And, especially now, as organized philanthropy faces numerous challenges from regulators and lawmakers, we should realize the value of a strong common voice that will allow everyone in the nonprofit world to work together to encourage greater giving by even more people.

The nonprofit status afforded to charities and foundations is based on one overriding premise: Our organizations serve the public good. And the overriding mission of membership organizations in the nonprofit world — principal among them the Council on Foundations — is to help all of us be as good as possible at doing that.

The collective impact of distributions from the national donor-advised funds is clear. And just as donors who make gifts to community foundations and other charities want to make a difference, so too do the donors who choose to work with the national funds.

Would the council want to ensure effectiveness and quality in one segment of philanthropy, but simultaneously choose to exclude from its purview the thousands of donors who work through organizations ineligible to join?

When prospective donors do their own research on the best giving approach, they do not consider the commercial roots of the national donor-advised funds versus the nonprofit roots of community foundations.

They are looking for many things, including efficiency, cost- effectiveness, guidance, investment performance, and the chance to make a difference in the lives of individuals and the well-being of their communities. Why should their personal choices preclude them — and the institutions through which they give — from benefiting from the work of the council, and vice versa?

Ultimately, the issue for the board of the Council on Foundations comes down to deciding whether to open its membership to all charitable-giving institutions in order to engender the greatest possible collegiality, collaboration, idea sharing, and influence — or whether to let membership be driven by competitive pressures and notions of exclusiveness.

It’s time for the council to open the tent and help private philanthropy fulfill its promise, and its obligation, to improve our communities. Allowing commercial funds to join the Council on Foundations could go a long way toward doing just that.

Thomas Peters is chief executive officer of the Marin Community Foundation, in Novato, Calif.