Nonprofit Law Resource Library
All power to the communities
Community is a buzzword in American philanthropy right now. Gone are the glory days of the middlepersons Ė charities that cheerfully took grants to work at selected sites and maybe let a little money spillover into the hands of the locals. Now the philanthropoids at foundations and trusts are eager to put the money directly into the hands of ... someone. I think it will be harder than they imagine.
Would US grantmakers entertain a radical idea? Donít spend time looking for the best, small, grassroots organisation in East Overshoe, Vermont, to take a grant. Instead, give it to a community foundation. Give it three ways: large sums as a permanent endowment, with income unrestricted, along with smaller sums in multiyear awards for unrestricted giving and for administration of the foundation itself.
Community foundations - or CFs, the inevitable acronym - are hybrids. They look and act like private, grantmaking foundations. But in the US, they are legally the same as an operating charity, such as the Red Cross. There are over 500 American CFs, with assets of over £10bn.
CFs enjoy a reputation for being responsive to their communities, able to make grants where most needed. But the reality is more complex. They are fundraising entities. Their grantmaking is restricted. Typically, an American CF will entice donations by offering four flavours of fund. Designated funds payout income to a fixed roster of charities. Field of interest funds leave some discretion to the CF staff, but must go to defined areas of endeavour - environment or building preservation. Donor-advised funds allow the donors to whisper in the ears of the CF staff and 'suggest' recipients. In my experience, such suggestions are followed approximately 100 per cent of the time. And finally - a distant fourth - a CF will accept unrestricted funds.
Which category is the most popular? Donor-advised! Which is the least? Unrestricted! So CFs are less able to pursue their own charitable goals.
Some years ago, the Charles Stewart Mott Foundation thought that community foundations were a phenomenon waiting to happen in the UK. To encourage action, Mott made a $1m grant, for dispersal through the Association of Community Trusts & Foundations (ACTAF) in London. Are the community foundations succeeding in the UK? Do they display similar patterns to the American experience? On my next visit to the UK, I hope to find out.