Keeping the “Community” in Community Foundations

In the recent Stanford Social Innovation Review article "Redefining Community Foundations," Silicon Valley Community Foundation (SVCF) CEO Emmett Carson strives to redefine what a community foundation is and suggests that SVCF might serve the world better by shifting efforts away from local needs.

I read this essay with dismay. I have worked onsite with more than 350 community foundations and experienced their dedication to their communities. It is impressive. With a 100-year history of community giving in America, there is too much at stake and to just define it away.

While a community foundation can give nationally and globally, we believe that its primary role is to serve the local community. Otherwise, it might be called a national foundation or global foundation.

Community foundations emerged 100 years ago when banks held charitable trusts from donors who died. A committee of local bankers and citizens would decide on how to disperse the income from the trusts. Eventually, committees like these started to act alone and incorporate as nonprofit organizations.

The 1969 Tax Reform Act introduced donor-advised funds, whereby donors could recommend how their funds were allocated. Such funds now dominate the assets of community foundations and, as Carson points out, the original role of community foundations has changed. The tail is now wagging the dog: Donor-advised funds have no local allegiance, and community foundations are now awarding grants not just locally, but also nationally and internationally.

Community foundations are unique in numerous ways. They have their nose to the ground; are available in emergencies on the local level; can find pockets of need within a community that national organizations might overlook; and discover outstanding local people who are doing significant work, which often has impact well beyond local— demonstrating new approaches to poverty, for example. Community foundations have special latitude; as public charities, they can experiment, be the first funder, and fund charitable activities whether or not they have official nonprofit 501(c)(3) status.

I have found that community foundations can be leaders in philanthropy. They can be the innovators. And because they know their communities so well, they can build more personal relationships and not be part of the growing tendency of foundations to see paperwork as due diligence. Community foundations can be leaders in democratizing the giving process—in defining people not as applicants, recipients, or grantees but as colleagues and partners in community-building.

A community foundation should be open to whatever enriches the community. Some community foundations unfortunately pre-define what they will and will not accept, and this leaves a lot of people out in the cold. The staff of a community foundation should be out of the office, finding programs and offering support, and encouraging innovation and commitment.

To be frank, allowing community foundations to become someone’s philanthropic bank account for which there is no payout requirement makes them surprisingly akin to commercial, donor-advised fund managers—Fidelity, Vanguard, or Schwab. They lose their unique role and purpose for existing, their reason to be.

In some cases, as with SVCF, most of a community foundation’s discretionary money is from local sources. To define away the local focus is thus doubly wrong.

Community foundations traditionally have been first responders when a need comes up at the local level. At their best, they can help predict and develop new roles for philanthropy. Community philanthropy should be the entrepreneurial dollar—the same kind of “risk dollar” as in venture capital. Donor-advised funds seem to have calmed community foundations and their willingness to venture locally.

There is no argument here against international giving, or for only regional or local giving. But, by definition, community foundations need to serve communities and their needs—and this role must sustain.

Read more stories by Bill Somerville.