Philanthropy and leadership: Have community foundations lost sight of their North Star?

What creates a community? The question bears consideration when we as a country seem to be driven further apart daily, cast into the foxholes of our respective belief systems.

Certainly, community embraces people living in proximity to one another, as in "the metropolitan area." Community also includes the institutions that support our common life: our government offices; corporate and commercial institutions; and what is sometimes called the independent sector — nonprofits and foundations that fund and perform services outside of government.

At the most basic level, private and corporate foundations (think the McKnight Foundation or the General Mills Foundation) make grants (write checks) to help nonprofits (think Second Harvest or Lutheran Social Service) deliver services needed in the community. But community foundations have traditionally played a role in addition to making grants: that of creating community through leadership and activities.

That makes the recent national news about the meltdown at the Silicon Valley Community Foundation (SVCF) in Mountain View, Calif., all the more thought-provoking. Forbes, the Atlantic, the Chronicle of Philanthropy and now the New York Times have written articles on the charges of sexual harassment and a "toxic working environment" at the enormous "community" foundation. SVCF CEO Emmett Carson, formerly president of the Minneapolis Foundation, has been accused of deliberately turning a blind eye to the alleged harassment and bullying of his chief asset-builder, Mari Ellen Loijens.

In the examination of what went wrong with the fourth-largest foundation in the country ($13.5 billion in assets), one element stands out: Fundraising and asset-building overwhelmed the community-leadership role. We have only to look at our local major community foundations to see the pattern.

When the Minnesota Council on Foundations was formed in 1975, the Minneapolis Foundation had assets of $15 million and the St. Paul Foundation $35 million. Today, both of these foundations are among the largest in the country, with Minneapolis at $750 million in 2017 and St. Paul at $864 million in 2016. Both foundations gave nearly $60 million in grants or payouts in the year most recently reported.

But where is the presence in the community? When these community foundations were small, they were each known for distinctive programs that benefited their communities.

The Minneapolis Foundation also initiated the Nonprofit Assistance Fund and developed the McKnight Neighborhood Self-Help Initiatives Program to support neighborhood development and citizen participation. The foundation listed and publicized the nonprofit organizations' capital campaigns in the area, so corporate and foundation funders could see the extent of what they would be asked to support and plan accordingly.

The St. Paul Foundation, too, was known for programs in the community, especially its minority scholarship programs and many small and large programs that supported literacy development and libraries in the St. Paul community. In the early days, it supported the Community Planning Organization, which brought together citizens to plan for community needs that funders might support.

Today, at a time when bringing communities together might seem a critical need, most of us would be hard-pressed to name a program from either metropolitan community foundation that attempts to do just that. Our community foundations have wandered from the path of community into the forest of fundraising. Why?

When the regulations for community foundations were developed some years after the 1969 Tax Reform Act (the government's first serious attempt to regulate charitable foundations), the regulators stipulated that community foundations must grow their assets every year by 10 percent. The reasoning behind this was that community foundations (a collection of funds and endowments, the income from which was to go to benefit the community) enjoyed a special tax status, somewhere between private (grantmaking) foundations and nonprofits, supported by the public contributions. For this reason, an individual could get a larger tax deduction for a contribution to a community foundation than if she set up a private foundation. The regulators obviously thought that this spur to growth would demonstrate support from the community for the foundation.

As a result, community foundations began to shift their staff activities from a convening, research and grantmaking role in a given community to a fundraising role. The most convenient vehicle for this growth was the donor-advised fund. This instrument focuses on the individual donor's charitable preferences, not necessarily the most important community needs.

What could be different? Former foundation officer Arthur Himmelman, in his recent paper "Building Bridges from Service to Justice: Power, Politics, and Partnerships," lays out some interesting areas for partnerships for all nonprofits, but they are particularly applicable and appropriate for community foundations, at least those that are still interested in "community-building."

Here are some activities that might build better communities in this time of division:

1) Convener: Hold public meetings; bring together many segments of the community to talk to one another; fund follow-up suggestions.

2) Catalyst: Find the best ideas to create stronger communities; fund creative efforts; start something that can change, for the better, the way citizens live together in a community.

3) Conduit: Use the capacity of the community foundation to funnel grants from general endowment funds to create more understanding among people; help donor-advised funds to get excited about these efforts.

5) Technical assistance: Make the staff of the foundation available, where possible, to assist nonprofits that are community-based, in everything from fundraising to technology. It will pay dividends.

Of course, the Minneapolis and St. Paul community foundations are already doing some of these things. But they are not assertive, as they once were, in using their names and public position to fulfill their mission of building community. Fidelity and Goldman Sachs can process donor-advised funds. Community foundations can be so much more.