‘We’ve probably just passed an important watershed,’ says Barry Gaberman of the Ford Foundation. ‘There are more community foundations outside of the US than inside.’ People talk about a community foundation ‘movement’, and certainly a concept that seems to be adaptable to so many different countries and different circumstances is an attractive one. But is its potential as great as its proponents claim?

If not, what are its limitations and how can these be overcome? Alliance asked a number of people who, in one way or another, have supported community foundation development in various parts of the world, to put the enthusiasm in perspective.[1]

What’s the big idea?

Why has community philanthropy – and community foundations in particular – come to occupy such an important position in the thinking of the philanthropic sector? Bill White of the Mott Foundation says that the main reason why Mott is interested in community philanthropy is that ‘most problems occur at the local level, and the local level is where people and place come together’. The second, complementary, reason is, as he explains: ‘We also believe there are tremendous amounts of wealth in communities. And community-based philanthropy provides an organized approach for ordinary people to (1) sit down and discuss local problems and (2) get some dollars together to help solve those problems.’

In similar vein, Ford’s Barry Gaberman reckons the advantage of community foundations is that they constitute a ‘philanthropic mechanism that in the best sense is run by members of the community who reflect the community, who are partners of the community, and have resources to be responsive to their needs’.

A slightly unhealthy tendency in the US

In this connection, he signals what he sees as a slightly unhealthy tendency in the US. ‘It seems to me,’ he says, ‘that in the United States we have gone through a period in which we moved away from our notions of what community foundations were, in which for the most part our notion of the stakeholders was the community, and our notion of who we served, and had to serve, was the community and its needs. We began to define our stakeholders as the donors to the community, and we tended to see those donors as the people we needed to serve in the first instance.’

This came about for a number of reasons, he feels: the threat that community foundations felt from the commercial gift funds, and the need for community foundations to grow beyond the modest levels they had achieved into significant players, both of which led to their offering donor-advised funds and other services to donors. ‘This is not a problem in itself, but worrisome when it shifts too much attention from serving the community to serving the donor. In Europe and other places around the world, the focus is still on the community and the needs of the community.’

A bridge

‘Initially,’ says Shari Turitz of Synergos, ‘we worked mainly with what we call community development foundations so we helped to build the Esquel Foundation in Ecuador and the Foundation for Community Development in Mozambique.’ These national-level foundations were able to provide a critical function: ‘linking between the government, the corporate community, international donors and international aid agencies, and local civil society organizations, so creating in many cases modest but still important strategic financing that was not available in those countries.’

For Turitz, this is one of the two main reasons why community foundations are taking off internationally: ‘One, civil society leaders are seeing them as a way to raise resources in a resource-scarce environment; two, in many local communities there is a lack of bridging organizations like this.’

Moral and material assets

So community foundations can identify local needs and bring local resources to their solution. But will those resources be adequate in areas of the developing world where community foundations are being touted? Money aside, says Brigitte Mohn of the Bertelsmann Stiftung, community foundations can play other ‘other non-grantmaking roles’. ‘Whether they have large financial assets or depend on limited resources,’ she argues, ‘with imagination and initiative there are many ways in which community foundations can generate positive change in their communities.’ A community foundation can exercise leadership in its community as convener, community expert or philanthropic educator.

Bertelsmann aims to promote the philanthropic impulse and professionalize the work of foundations. ‘We see community foundations as a central component of this mission,’ says Mohn. ‘Because of their independence and flexibility community foundations are uniquely positioned to attract new donors and contribute to building civil society on the local or regional level.’

The resource question

In addition, says Barry Gaberman, it’s wrong to suppose that in poorer countries community means will be so scarce that community foundations will have to be entirely funded externally. ‘It does seem to me that all communities have some measure of wealth in them.’ Bill White agrees: ‘Even in a poor area, there are probably resources available to help communally to solve problems. By London standards it may be a paltry sum, but in a very poor region of the world it becomes a magnificent sum.’

Local money is not just a material asset; it can also confer legitimacy on an organization. ‘Those communities that find ways to capture some of that local wealth, even though it might be modest, have a sort of legitimacy that is hard for the others to have,’ says Barry Gaberman. ‘I’m thinking of the community foundation in Togliatti (see p50), which if I remember correctly did a whole bunch of things like running bake sales. They then generated modest funds and made some small grants, and I think that had a legitimizing effect that was very powerful.’

Shari Turitz cites a similar example from Zimbabwe: ‘We’ve been working with a community foundation in the western region of Zimbabwe, which started with 4,000 families donating one Zim dollar. In US dollars it’s a very small amount of money, but it was significant in demonstrating the buy-in of those communities into the foundation.’

Too much expected of them?

One or two of the larger funders have tended to see community foundations as a way of introducing grantmaking institutions into countries where they are thin on the ground (in Central and Eastern Europe and South Africa, for example). This may mean that more is expected of them than in Western Europe or the US, where community foundations constitute only a fraction of grantmaking institutions overall. (In the USA, for example, there are 700 community foundations out of a total of 65,000 private and corporate foundations. In Slovakia, there are 67 indigenous grantmaking institutions altogether, of which 10 are community foundations.) Are community foundations outside North America and Western Europe being asked to take on too much?

Steen Jorgensen of the World Bank sees and acknowledges the danger: ‘I agree with you that there is a lot of emphasis being put on communities, and there is always a danger of faddism in development. In the 1970s states could do no wrong, in the 1980s and 1990s the markets could do no wrong. And we need to be careful now not to say communities can do no wrong. Because there are clearly limits to what you can do with community-level philanthropy.’

The challenges to building philanthropy in countries where there is little formal tradition of it – the absence of a favourable legal and fiscal framework, little professional grantmaking expertise – are well rehearsed. Will community foundations be up to the challenge? ‘What we’ve seen,’ says Turitz, ‘is that the closer you go to the local level, the more likely it is that you will be successful. We’ve also seen that though institutional philanthropy is a difficult sell, it’s less difficult when you’re talking to a donor about their local community where their business functions than if you’re talking about giving to something that doesn’t directly affect their lives and about which they have no clear understanding.’

Even where there is local giving going on, a community foundation can bring a special virtue, she thinks: ‘One of its principal defining characteristics is that the board itself, the decision-making body itself, is diverse, so it creates this space to bring different voices to the table.’

Sustainability and endowments

As always, there is the question of durability. Endowments can provide for the longer-term survival of a community foundation, and they can also give it a certain independence of action. Shari Turitz points out another advantage: ‘A permanent fund distinguishes them from the local non-profit organizations, so it takes them from a position of being viewed potentially as competition to being viewed as a resource.’

But are they indispensable, and are they always achievable? Brigitte Mohn feels that in Eastern Europe, though it will take time, endowments are achievable: ‘In Eastern Europe endowments at many funds are still quite small. But you have to keep in mind that in these countries community foundations are at the forefront of restoring a philanthropic tradition that had been neglected during the socialist period. It might take a generation or longer to build up a decent endowment in a small community foundation. But ultimately those organizations will be there with their own resources.’

Barry Gaberman stresses the importance of independence. He draws a distinction between community foundations and other forms of community philanthropy. ‘In my own mind, one of the things that distinguishes a community foundation from a United Way or a community trust or what have you, is the fact that it does have control in large measure over its resources and its endowment funds.’ He adds: ‘I would hope that their endowments give them a certain measure of flexibility and predictability, and a willingness perhaps to take some risks in terms of funding in areas that might be contentious and controversial. That’s hard to do for institutions that don’t control their own resources.’

For him, though, the issue is not so much whether a foundation has an endowment or not as whether and how far an endowment places restrictions on a foundation’s actions. ‘The battle is always how much of those endowed funds have unrestricted purposes versus how much is captured in donor advised funds and for restricted purposes.’

Bill White too singles out this question of restriction of funds. He also suggests that the endowment question might be a matter of local culture: ‘After all, in the UK much of the administrative support comes on an annual basis. But I do think it is very important for a community foundation to have some funds that are not restricted, so that if a problem comes up, they can respond to an immediate need rather than having to say there’s a real need now, where do we find the money to solve this problem? So I think there is value in having some unrestricted funds, but I don’t get particularly concerned about whether or not they have a big endowment.’

A question of trust

It is also possible, he thinks, to approach the endowment question from the wrong end. The first thing is to develop trust: ‘I’d rather see a good programme of work develop, and if that means it’s based on flow-through funds for a while, so be it. But over a period of time, as it works on problems, a community foundation develops trust. And as it develops that trust, I think then, quite naturally, people will say, “I’ve got some money, and I’m willing to give it to this outfit for an endowment, so they can continue the work after I’m no longer around to give money.” But I think you earn that trust. And endowment building is all about earning trust.’

Shari Turitz agrees that an endowment-first approach is wrong. You have to show your worth as a community institution first. ‘You can’t just knock on someone’s door and ask for an endowment gift for an organization that’s never done anything. It won’t work.’

This is where external funding (see below) can be useful. ‘What we’re doing on the Mexico border, for example, is working with funders in a collaborative, providing small amounts of resources to give the community foundations space to set up their office, to have minimal personnel, and to have some programmatic money that they’re required to match with local funds. So you get them out in the community right away raising local money.’

‘Each community foundation has to find its own opportunities for growth, financial sustainability and social impact,’ believes Brigitte Mohn. Building an endowment is ‘only a means to an end of serving the community’. She also cites Bernholz, Fulton and Kasper’s recent report[2] in which the authors argue that, while sustainability is a central issue for community foundations, concentrating exclusively on asset development is likely to result in declining relevance.

Can you be sustainable without an endowment?

One reason why endowments will prove difficult to create in many places is the lack of an estate tax, argues Shari Turitz: ‘I think this is the big elephant in the room lots of people don’t talk about. So much of the endowment building within at least the US community foundations arena was built on the estate tax.’

Like Barry Gaberman and Bill White, she doesn’t see endowments as absolutely essential to a community foundation’s survival: ‘I think you can still be a sustainable community foundation without an endowment, but I think having an endowment helps.’ She suggests that a goal for community foundations to set themselves would be ‘to reach an endowment large enough to cover operations or some significant portion of operations’.

However, she feels that ‘sustainability is probably better defined in the developing world context around the issue of a diversified funding base … Some of the least sustainable community foundations I’ve seen are ones that are wholly dependent upon one or two often international sources of funding. Very often those sources are fickle. They are not the patient capital necessary over many, many years to see through the local ownership.’

Whatever form it takes, she feels, local giving, along with local ownership, is essential to sustainability. ‘Even if local giving is very small to start with, the institution has to understand its role and its mission from the beginning to be one of raising local resources and mobilizing the local community.’

Material considerations apart, what Turitz feels is significant about an endowment is that it is symbolic of – even though it cannot actually guarantee – the intention of community foundations to become permanent features of the local philanthropic landscape: ‘I think the whole idea that this community foundation is different, because it’s going to be there forever, is really important.’

Balancing local and external resources

She also believes that non-local sources of funding – ‘probably from internationals and even governments’ – will play a much greater part in developing countries than they have done in the case of US community foundations. ‘Social development resources in places like Mexico can sometimes be significant,’ she says, ‘and community foundations may need to have that as part of their corpus – though it should never be anywhere near the majority.’

External support can be crucial, if timely and rightly judged: ‘In order to demonstrate to a local funder in Mexico that this thing is worth something, you have to demonstrate that you have a track record, which is where external programme money comes in. It’s very difficult in a society where they’re not used to what a community foundation is or what it can do to convince people to give money to community foundation programmes right off the bat.’

The World Bank

That being the case, is there a role for multilateral institutions in supporting the development of community foundations? The World Bank believes so and for the last three years it has been involved in what Steen Jorgensen of the Bank describes as a pilot learning programme, in partnership with Mott, Ford and the Council on Foundations, to explore how the World Bank can support the development of community foundations.

The idea of community foundations was proposed to the Bank some three years ago at a time when the Bank was already looking at the appropriate role of the private sector in community development. The results have been striking. ‘Right now this thing is really going well. The first part of the programme is up and running, the community foundation in Moldova is moving ahead, the Thailand one looks very promising, the Kenya one is going ahead.’

While guarding against excessive optimism, he is upbeat. ‘It’s taken off much more rapidly than I expected,’ says Jorgensen. ‘Usually the World Bank is compared to a super tanker – it takes for ever to turn. Within the first year of our pilot programme we had the first governments taking out a loan to try to set up community foundations. I hadn’t expected that. Usually we don’t get those kinds of quick responses.’

Progress has been so striking that it has led to the Bank’s contributing to the setting up of the Global Fund for Community Foundations. The pilot projects very soon began to ask for technical assistance, but the Bank is slow and has no in-house expertise. The Global Fund, to be managed by WINGS, will fill the gap. As Jorgensen explains, it will act as a ‘clearing house’. ‘When people have a good idea or they’ve heard about it or seen the neighbouring town do it, they have a place to go that can quickly give them a little bit of technical assistance, maybe even help fund some start-up activities.’

Says Jorgensen, ‘There is community demand for these kinds of interventions from developing countries, and we really need to find a way of setting up a sustainable support structure.’

Since the Bank makes loans primarily to governments, ‘it wasn’t obvious that there’d be a good fit between that and private philanthropy, but I think we’re really seeing it. In South Africa and Brazil it seems like what we’ll end up doing is basically linking these local initiatives up with national policy dialogues, making sure the national policy is facilitating, but we may not finance anything.’

A community foundation for everyone

Barry Gaberman feels that ‘community foundations do see themselves as just having gotten a toehold, if you will. I think one of the aspirations that one might have for philanthropy in the future is a cluster of nation states within which all the territory is covered by one or another community foundation. Probably in Canada you’re close to having something like that. But while there are 700 in the United States, given the scale of the United States there are still a lot of empty pockets.’

‘Increasing numbers of cities, metropolitan areas and regions worldwide,’ says Brigitte Mohn, ‘are embracing the idea that a community foundation can promote sustained, community-based philanthropy and simultaneously respond to changing local needs.’

No silver bullet

But the excitement and enthusiasm generated by community foundations should not be allowed to obscure the fact that they are not the only possible form of community philanthropy. As Barry Gaberman warns: ‘When you let your “missionary zeal” go to such an extent that the only legitimate community philanthropy is a community foundation, I think it’s counterproductive.’ He points out that other things are stirring in community philanthropy: ‘You might have, for example, United Ways operating. You might have very interesting traditional mechanisms operating like giving circles.’ In the case of giving circles, he feels, there is exciting potential for easier and quicker communication to convert an older phenomenon into something much more effective.

He also cautions against thinking any one concept is the answer: ‘I don’t think that any single philanthropic mechanism is a silver bullet for dealing with intractable complex social problems that we deal with in terms of social justice, eradication of poverty and things like that.’

Bill White agrees that the community foundation is only one star in the community philanthropy constellation: ‘I don’t think a Mott or a Ford, or even just a bunch of people concerned about this area of philanthropy, can go in and say this is the model that you have to adopt. I think you have to ask the fundamental question about how we can help local people in a particular geographic region be more organized in their approach to dealing with problems. That’s a conversation that has to happen in each community, and in each case it will come out slightly differently based upon the history.’

Not cast from one mould

Even where something like a community foundation could offer distinct advantages, it is important that those who support them do not go in with a definite prescription. ‘There are different ways to replicate programmes,’ says Bill White. ‘You don’t have to follow “the McDonalds hamburger approach” to franchising, when you know what the restaurant is going to look like before it’s open.’ You could expose people to ‘different ways of organizing and addressing problems in [their] community and raising resources to help solve those problems. But it’s up to the people in that community to then turn on the light switch, so to speak.’

He mentions the community foundation in Banska Bystrica, Slovakia. ‘We initially funded it not because we had a preconceived idea but because Juraj Mesik had travelled around and seen community-based philanthropy work in different cultures … He had been exposed to a lot of it, internalized it, and put it into the Banska Bystrica experience.’ The result was what White calls ‘one of the most beautiful business plans I have ever seen’.

A wrong approach

He admits that Mott has sometimes taken a ‘top-down approach’, where they have simply endowed foundations (he gives the example of South Africa), and ‘guess what, I don’t think they have been through the technical assistance process, I don’t think they’ve been properly prepared. In some of those it hasn’t been 100 per cent successful, I don’t even know if it’s been 50 per cent successful. It was the wrong approach.’

He contrasts this with the approach they took in the UK. Many people, he says, focus on the challenge grant programme that Mott ran with Charities Aid Foundation in the UK. ‘What they neglect to look at is that prior to that there was an intensive consultation and technical assistance programme taking place. The programme would not have worked without CAF, which made sure that what we were doing was put in terms of UK experience and reflected UK values. It also involved technical assistance. It involved the board chair and the executive director in the UK going to the US and seeing how some of the local US community foundations did things, and then a technical assistance provider from the same foundations going over to the UK and spending time with them, and helping them write their business plans. That was what made that entire challenge grant programme work. That didn’t take place in South Africa, and I think as a result that programme has not taken off as we would have liked.’

Widening the definition

‘It’s not realistic to assume these foundations are going to end up looking like the Cleveland Foundation,’ says Shari Turitz. ‘It’s simply not realistic, in countries where there is no estate tax, no tradition of giving to endowments, and completely different philanthropic cultures and regulatory environments, to expect that the US model can be transferred, unamended.’

But the model is still a promising one, she argues, ‘especially if you relax and are a little bit flexible about the issue of endowment … It seems to me from what I’ve seen in the last ten years that when leaders of a certain ilk become familiar with what a community foundation can do and how it functions, they become very excited about it and begin to think about how it might work within their context.’

Rethinking the notion of community

Barry Gaberman also believes there is a case for redrawing the notion of community: ‘It does seem to me that defining community in a strictly geographic sense may not be necessary. There are communities of interests looking at, say, issues related to gay people, where you define community somewhat differently. It has the same sort of attributes of community, and it ought to be considered legitimate.’

Bill White also sees a need for the idea of community to be reconsidered in the US: ‘One of the things I am increasingly noticing is that in the US, we seem to be having trouble in understanding what community is. I think Europe and other parts of the world have a better sense of community in some respects. So it’s not a one-way street. I think increasingly we in the US can learn from the Italian model, the UK model, the German model, the Slovakian, and others – what community is and how people work together.’

The importance of permanence

For Bill White the key thing about community foundations is their permanence: ‘I think the concept of community philanthropy can be very varied and include the United Way and all that, but at the end of the day the unique feature of a community foundation is that it has a degree of permanence to it. And I think that’s very important. Because there’s too much of the Silicon Valley venture capital thinking about – that you can rush in and invent a solution to a problem, solve the problem, and move on to the next problem. But many of the problems that community foundations work on have to do with basic issues regarding equality, diversity and poverty, and they don’t lend themselves to easy, instantaneous solutions, and you need that sense that there’s an organization that will be there, that is not only applying resources to the problem but also helping to create a dialogue about it. That takes time.’

The need for time was stressed by all our respondents: ‘I don’t think,’ says Shari Turitz, ‘you can expect an organization to go from the idea stage to an established foundation in anything less than three or four years … and it takes longer in an environment that is not as propitious as we have in Canada or Europe or the US.’

That, says Steen Jorgensen, was why the Global Fund was created: ‘We need a sustained international support structure for community foundations.’

Part of the answer

There seem to be good grounds for optimism that community philanthropy can produce significant results. The key thing, for our respondents, is not to create an absolute dichotomy between community foundations and community philanthropy more broadly. So long as a community philanthropy organization can achieve local legitimacy and a degree of independence conferred by having its own unfettered resources, and can prove itself a valuable part of the local philanthropic landscape, then it doesn’t matter whether it calls itself a community foundation or not. It is crucial that, in the excitement they have produced in the philanthropic sector generally, community foundations should not be idealized at the expense of other valuable forms of community philanthropy.

As Barry Gaberman remarks: ‘I don’t think they are the answer in and of themselves, I think they are part of a larger picture that we call community philanthropy. Although they are at this moment probably the fastest growing part of that, and maybe in some ways the most exciting, I think they are only a part.’

1 The complete transcripts of the interviews on which this article is based can be found on the Alliance website in Alliance Extra at http://www.alliancemagazine.org

2 Lucy Bernholz, Katherine Fulton and Gabriel Kasper (September 2005) On the Brink of New Promise: The future of US community foundations. See http://www.communityphilanthropy.org

Alliance would like to thank the following people whose ideas form the basis for this article:

Barry Gaberman  Senior Vice President, Ford Foundation
Bill White  President and CEO, Charles Stewart Mott Foundation
Brigitte Mohn  Member of the Board, Bertelsmann Stiftung
Shari Turitz  Director, Strengthening Bridging Organizations, Synergos Institute
Steen Jorgensen  Director, Social Development Department, World Bank

Community Foundations and their supporters

Bertelsmann Stiftung
For the past decade, Bertelsmann has been contributing to the rapid development of CFs in Germany and in Europe through various efforts like the Transatlantic Community Foundation Network (TCFN) and the Community Foundation Initiative (Initiative Bürgerstiftungen) in Germany. Both projects support the exchange of experience and expertise among CF practitioners and provide management know-how to emerging and established CFs.
See http://www.bertelsmann-stiftung.de
http://www.tcfn.efc.be
http://www.die-deutschen-buergerstiftungen.de

The Ford Foundation
Following ad hoc support to individual CFs in the 1960s and 1970s, Ford went on to fund a number of initiatives on CF leadership, rural CFs and urban CFs in the US. Outside the US, they are mostly involved in initiatives that aim to create or support CFs in a country (for example, the CF initiative in South Africa) rather than in supporting individual CFs, though there are instances where they do provide modest support to individual organizations.
See International Connections: resources that support the growth and development of community foundations globally, published by WINGS, for information on Ford funding of community foundations. Download from http://www.wingsweb.org

The Mott Foundation
Mott has provided some three decades of support to CFs, firstly in the US, then in Canada, then more widely still. Again, like Ford, their support is unlikely to be for individual organizations, but chiefly for fieldwide, infrastructure organizations (they are supporters, for instance, of WINGS) or for country-wide initiatives. Mott, alongside CAF, funded CF development in the UK, and was also a funder of the initiative in South Africa.
See http://www.mott.org/publications/pubs-list.asp for a selection of special reports on the Mott Foundation’s support for community philanthropy.

The Synergos Insitute
Not a grantmaker itself, Synergos helps to build the capacity of CFs around the world. It has been involved in building the CF movement in Mexico, and has worked with the border philanthropy partnership on building CFs along the US-Mexico border. It also, occasionally, works with individual foundations, helping build Brazil’s first CF, the Instituto Rio, and most recently helping establish a CF in the tsunami-affected area of Thailand.
See http://www.synergos.org

The World Bank
The World Bank has long supported community development programmes, so working at community level is not a new thing. But for the last three years it has been working in partnership with the Mott and Ford Foundations on a pilot learning programme to explore how the World Bank can support the development of CFs. Following this, in June 2005, the Bank made a three-year grant to WINGS to start the Global Fund for Community Foundations. The Global Fund aims to promote the development of CFs in World Bank client countries. It will provide a variety of services for early-stage CFs, including grants for technical assistance and capacity-building, seed funding and challenge grants, and evaluation.
See http://www.wingsweb.org/download/GFCFsummary_nov05.pdf