Dianna Sutton's - "Philanthropy Corner"
Sunday, August 1, 2010
The Value Proposition of a Community Foundation

By Dianna L. Sutton

Anew member of the Community Foundation of the Florida Keys board of governors presented a thought-provoking question at a recent meeting: "Do we have quantifiable evidence that proves having a community foundation is better than not having one?"

The answer required an objective and analytical review of the essential contribution and performance of the Community Foundation of the Florida Keys (CFFK) and it also made me wonder if this isn't a question every nonprofit organization should periodically ask itself.

The response to the question provided a great learning opportunity for the entire board about how a community foundation business model works. It is also worth sharing with readers of Philanthropy Corner as I believe it provides an understanding of the value of the philanthropic work of a community foundation.

Mark Brewer, president and CEO of the Community Foundation of Central Florida, a colleague and well-respected leader in community foundation management both nationally and statewide, responded with the following very thoughtful and insightful comments about philanthropy in general.

"Many in the private sector try to apply a 'market share' analysis to philanthropy. If we were manufacturing a product, we would go to the marketplace and research who is buying it, how much they pay and what kind of margin we could produce by selling the product. We would then measure our performance against the market to determine how well we were doing.

"The problem with this approach is that philanthropy is not a market share business. In other words, there is no measurable amount of philanthropy as there is in a market for tires, suntan lotion or beer. Instead, community foundations create markets by providing opportunities to give, vehicles for giving and community momentum that, if not there, would result in less giving.

"In other words," continues Mark, "the community foundation is not competing to get money, it is putting the right opportunities in front of charitable investors at the right time. The longer the community foundation is there, the larger the market can be made. Research on community foundation life cycles indicates that after 12 years, and then about every half-generation, the foundations create bequests that would not have been there if the foundation wasn't there."

One way used to measure the impact of a community foundation is a formula that calculates a return on investment (ROI). This is done by taking the first gifts(s) used to establish a foundation (the investment), then adding the total amount of endowed assets and total grants since inception (the product). In the case of CFFK, a small group of people invested $213,000 to establish the foundation in 1996. Today, we have $7 million in assets and have granted $15 million since inception. Thus our return on investment is $22 million to $213,000.

But using this methodology of measuring only the money neglects grant making and community leadership, two things that wouldn't happen without the community foundation. The full ROI for the community is generated by the impact created by grant making and building philanthropic assets. A community foundation is differentiated from other nonprofits by the value it provides for the community, donor and grantees.

CFFK's value proposition has been supported by creating programs and actions that have increased philanthropy in the Keys. For example, since 2004 the number of philanthropic funds under management has grown by 300 percent and the number of nonprofit endowments has seen a 600 percent growth.

Even with the headwinds of the market and spending rate of grants from donor funds, CFFK has increased its assets 100 percent. Additionally, the My Key West Emergency Relief Fund generated $1.3 million in 2005 for the victims of hurricane Wilma and legacy giving has dramatically increased.

Arguably a significant portion of this giving was "new" philanthropy in our community that would not be available if the CFFK did not exist.

Additionally, the VIPs/Friends outreach program, income from fund administration and gifts by the Marion Stevens Fund have generated more than half a million dollars for CFFK operations, including the creation of the Center for NonProfit Excellence (CNPE). More than 130 board members representing more than 50 Monroe County nonprofit organizations have been trained in best practices through the CNPE Leadership Success Academy. The results of the program quantifiably indicated dramatic improvement in the leadership of these nonprofits. This program would not be available if the CFFK didn't exist.

Other unique contributions to community philanthropy includes CFFK's comprehensive and professional financial growth management of donor funds that, coupled with a spending policy, creates new money over time. CFFK also provides a safe harbor for legacy funds -- a promise that funds can safely exist for the long term should a nonprofit fail or cease to exist.

CFFK also provides a safe harbor and inspiration for nonprofits to create endowments from donors who might not otherwise donate or know how to carry forward their giving after their lifetimes. CFFK also serves as the platform for individuals who want to donate to the community at large, not just a specific NPO, after their death. In addition to the known estimated $20 million in bequests for the community, CFFK has received more than $1 million in bequests from individuals who were anonymous until their intent was declared after their death.

This objective and analytical review provides evidence that the CFFK adds value to our community by meeting its mission of encouraging philanthropy, matching these acts of caring to the community needs and serving as a vital partner to philanthropists and the nonprofits CFFK serves.

I highly recommend every nonprofit conduct this type of review and assessment.