2. A very special thank you to Gaia Church for your editing work.
3. Table of Contents
Executive Summary 3
What is this all about? 3
Philanthropy 101 4
Community Foundations 6
Strategic Philanthropy and Community Investment 13
Conclusion 18
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Executive Summary
The purpose of this paper is to communicate this conceptualisation of philanthropy,
community foundations and strategic community investment. As philanthropy and
community foundations develop, so too do the approaches taken to ensure that
communities are best served to promote meaningful change.
The purpose of the paper is then twofold: to discuss the history, development and
present day of philanthropy and community foundations; and to discuss strategic
community investment and the tools that community foundations can use to empower
their communities in making transformational, sustainable change.
What is this all about?
Community foundations are one of the fastest growing forms of community
philanthropy in the world, yet despite this they lack one common definition. This lack
of one common definition means that community foundations are not restricted to one
model or way of working, ultimately meaning that their opportunities are boundless.
While, no two community foundations are the same, their common purposes are clear:
to understand a community’s collective goals, face the community’s toughest
challenges, and embrace the community’s most inspiring opportunities, to create
sustained improvement in the quality of life for all people in a defined region.
Community foundations were born from the concept of philanthropy, a form of strategic
giving to promote public good. In New Zealand, 14 community foundations have
spread across the country since the early 1990’s, and collectively oversee fund
management of $50 million. In Europe and North America, community foundations
have existed since the early 1900’s. Strategic community investment and its tools are
used by community foundations to empower communities to understand their needs
and aspirations, and direct them with how best to use their resources for change.
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Philanthropy 101
What is ‘philanthropy’?
Philanthropy comes from the Greek word ‘philanthropia’ meaning “love of mankind”.
It’s a concept that originated in 347 B.C. when Plato left a will to his family, requesting
that the proceeds from his farm be used to support the academy that he founded.
Although there can be many definitions of philanthropy, for the purposes of this paper
the definition is:
“Philanthropy seeks to address the root cause of a problem, allocating resources to
address the cause with a collaborative, macro and long-term vision of creating
sustainable and transformational social change and development.”
Charity versus Philanthropy
Critical to understanding the concept of philanthropy is understanding how it differs
from charity. The two concepts are often used interchangeably – and understandably
so. With great similarities in terms of purpose and action, their difference really exists
on a continuum rather than in stark contrast. Charitable and philanthropic organisations
are different and thus it can be difficult to state that one is purely philanthropic or purely
charitable. However, if one was to define the difference between it would be this:
philanthropy seeks to solve the root cause of a problem whilst charity serves to
alleviate the suffering that is caused by the root problem.
Philanthropy and charity, at their most distinct, show the difference in taking a ‘strategic
approach’ versus an ‘emotional approach’. By taking a strategic approach,
philanthropy considers investment that will have the greatest impact on society. This
is future-focused and aims to target issues at their root, focusing on the general
common good of society and how to solve issues with a wider perspective.
In contrast, by taking an emotional approach, charity can be seen as more reactive
and immediate. It is sympathetic towards individual causes and focuses on relief and
rescue, and thus makes a profound difference in the lives of people.
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CHARITY PHILANTHROPY
Present Future
Micro Macro
Targeting individuals Targeting common good
Temporary Sustainable
Alleviating suffering inflicted by the
problem
Addresses the root cause(s) of a
problem
Reactive Proactive
Emotional or sympathetic Strategic
What is philanthropy’s role in society?
Critical to understanding philanthropy’s role is understanding that it is often free of the
constraints that other vehicles for community benefit – the government and private
sector – face. Academics often suggest that combatting complex social issues in a
meaningful way is not something that the government or private sector can do alone,
rather in collaboration with many groups. Philanthropy’s role in society is to connect a
range of individuals and groups together within a community with relevant information
on the current state to act, and consequently promote the common good.
Types of philanthropy
The concept of philanthropy continues to evolve over time. Due to this, there are a
variety of terms used to describe different types of philanthropy. These terms, however,
display some common trends that show where philanthropy’s focus is now. These
trends are: community development; and revitalization through strategic thinking with
a long-term focus on creating impact. Some buzzwords have emerged that
communicate the aforementioned common themes. They are summarized below:
Strategic Philanthropy: This is data-driven philanthropy that involves the
synergistic use of resources to achieve meaningful and measurable goals. Strategic
philanthropy considers philanthropic activities in light of their effectiveness to reach
high-level goals. This involves holistically understanding the needs and aspirations of
a community, through research, to undertake strategic grant-making activities that have
a large and well-defined goal with transformational effects on the root cause of issues.
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Effective Philanthropy: This is philanthropy that seeks to measure its impact and
therefore increase that impact. This is philanthropy that doesn’t just do – it measures
what it has done to see whether that has been effective.
Venture Philanthropy: This is the application of the techniques of venture capital to
philanthropy. There are four common principles to venture philanthropy:
o Ensuring that non-profits grow their capacity to make a greater impact through
building infrastructure and management capacity;
o Ensuring grant-makers are highly engaged;
o Ensuring that there are clear benchmarks of performance; and
o Ensuring that there is a long-term focus in activities.
Philanthrocapitalism: This is philanthropy that uses the tools of capitalism to solve
social issues. It encourages the investment in social entrepreneurs, investment banks
and management consultants, as in the for-profit world. However, this type of
philanthropy receives some criticism as some of the problems it seeks to solve are
caused by the for-profit organisations it models.
Community Foundations
What is a ‘community foundation’?
From a legal perspective, community foundations are simply grant-making charities.
This means that their operational purpose is to raise and dispense funding in their
defined region (a region that varies in scope depending on the community foundation).
Foundations have a board of trustees that consists of members who are representative
of the community. This board of trustees provides governance and strategic direction,
and aids in the developing of a foundation’s resources.
However, this definition is not nearly detailed enough to explain the complex and
thorough duty of community foundations. In more detail, community foundations build
permanent endowment funds through pooling donations from donors, and coordinate
the investment of these endowment funds to match both donor and community
interests, needs and aspirations, to ultimately achieve collective betterment and social
improvement of a region.
It could be said that community foundations evolve when informed leadership and
resources meet; they see the emerging needs of a community through research, and
leverage strategic partnerships to create a real impact in their local area.
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Further still, for some community foundations, their purpose is to also engage in
philanthropy consulting services. This is the process of using research to provide
specialised and straightforward information and advice to donors that will aid them in
achieving their philanthropic goals.
What does a community foundation model look like?
The answer to this question is both simple and complex: there is no one community
foundation model. The possibilities for their structure, strategy, leadership and
governance are boundless and are often decided based on societal and cultural
contexts and the intent or interests of their founders. The only certainty for what
community foundations are is that it involves the mobilisation and connecting of
resources in the community. Their mission can be undertaken in numerous ways. This
uncertainty, then, makes defining them complex – but also mirrors the necessary
organic nature of such organisations that allows them to best reflect a community and
respond to complex social issues.
There are 12 characteristics that are common to most community foundations:
Community Foundations Today
Community Foundations have existed since the early 1900s and have developed
substantially since those early beginnings. There are close to 2,000 in existence today
Grant-making
Accountability to
local people
Seeking local
donations
Building inclusion
and trust in the
community
Having local people
as leaders in the
organization
Serving donor
needs
Catalyzing
community
development
Building an
endowment
Raising money for
grant-making
annually
Having a board
reflective of
community diversity
Pursuing equity
Acting as a fiscal
intermediary for the
community
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worldwide, the movement having doubled over the last 15 years. Over 74 percent have
been created in the last 25 years.
There are a number of factors influencing the establishment of community foundations,
such as community leadership, grassroots activism, inadequate government services,
changes in the political environment, and government initiative funding. The influence
of ‘grassroots activism’ has caused the recent momentum in community foundation
establishment, with communities taking back the responsibility of tackling social
problems. There are now community foundations in 69 countries and they can be found
on every continent except Antarctica.
Today’s Community Foundations: A Snapshot
The History of Community Foundations
United States
The first community foundation in the United States was also the first one in the world,
established in 1914 in Cleveland. It was started by Frederick H. Goff, a banker and
lawyer, who had the idea of pooling numerous charitable gifts from philanthropists into
one fund for the development of the city. It was said that those funds would be
distributed by community leaders to fund “such charitable purposes as will best make
for the mental, moral, and physical improvement of the inhabitants of Cleveland”.
The foundation initiated the endowment fund model in 1944 called the Combined Fund
– a model that is widely used today by community foundations globally. This fund
200,000
Average population
served by community
foundations
7.8
Average staff size
16
Foundations with
over 51 employees
US$3.73 billion
Largest endowment
fund (held by Tulsa
Community
Foundation)
1,031
Foundations in North
America
650
Foundations in
Europe
60
Foundations in Asia
56
Foundations in
Oceania
30
Foundations in Africa
11
Foundations in South
America
2,201,116
Average population
served by community
foundations in
Oceania
11
Foundations globally
with endowment
funds of over $1
billion
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allowed people of all income levels to contribute to their community. In 1957 the fund
granted US$1 million, and today has collectively distributed US$1.88 billion. Today,
they employ 77 full time staff and have an endowment fund of US$2 billion, distributing
US$89 million annually.
United Kingdom
The first community foundation in the United Kingdom was established in 1979. The
Northern Ireland Voluntary Trust (now known as Community Foundation for Northern
Ireland) was formed with funding from the government, with the purpose of assisting
the healing of the Protestant loyalist majority and the Catholic nationalist minority from
decades of conflict.
During the 1980s, Michael Brophy, from the Charities Aid Foundation, was responsible
for transferring the community foundation form in the United States to the United
Kingdom. In partnership, the government and Charities Aid Foundation established the
Community Trust Development Unit to act as an umbrella organisation for the
expansion and promotion of community foundations in the United Kingdom. The
government gave an initial funding grant of £790,000 that was to be matched by
independent fundraising. The foundation describes the most meaningful change
caused by its efforts, as the opportunity to work with the most marginalised
communities, increase their self-confidence and awareness, and facilitate their
collaboration with other groups that were former enemies who they can now treat as
friends.
Some endowment funds in the United Kingdom are as large as £40 million, and others
are as small as £1,000. Generally, the foundations are more conservative institutions
and place more emphasis on the government to address social issues; this is different
to the United States where the emphasis is on the community or individual. Today,
Community Foundation for Northern Ireland employs 45 full-time staff and has an
endowment fund of £20 million, distributing £4.7 million annually.
Canada
William Forbes Alloway established Canada’s first community foundation, the
Winnipeg Foundation, in 1921. Alloway was a banker and gave a CA$100,000 gift to
establish the foundation. In 1922 the foundation made their first grant of CA$6,000 to
11. 10 | P a g e
the areas of health and children, and in 1924 it anonymously received its second
donation of fifteen dollars’ worth of gold coins. Upon Alloway’s death in 1930, his estate
– worth CA$2 million – was left to the foundation, which allowed for an expansion of
grants during the depression. The foundation had the opportunity to innovate and
expand due to funding from the government and, in 1981 assets of the foundation
reached CA$20 million. By 2012, the foundation had CA$500 million in assets and
cumulative grants totaling over CA$300 million.
In 2012, Community News Commons was launched in Winnipeg, which was a media
project that focused on engaging the community people in community life and in 2014,
the foundation spoke with approximately 1,800 youth with a purpose of scoring
Winnipeg’s fifteen key areas in Youth Vital Signs. Vital Signs is a strategic community
investment tool that is used by foundations to assess the needs and aspirations of
regions. It will be discussed later in this paper.
Today, the Winnipeg Foundation employs 32 staff and holds an endowment of CA$560
million, distributing CA$20 million annually.
Europe
Slovakia saw the first community foundation established in Europe in 1994: The
Healthy City Community Foundation. It was established by the Rotary Club of Banská
Bystrica after the city participated in the World Health Organisation’s ‘Healthy Cities’
project, which acknowledged the importance of community development and citizens
being active in addressing local social concerns. Despite difficulties in fundraising,
US$30,000 was established by community leaders to initiate fundraising efforts.
Today, the foundation employs two full-time staff and serves a population of 200,000.
New Zealand
According to the Charities Aid Foundation, New Zealand is the third most charitable
nation in the world after the United States and Ireland. Per capita, New Zealand has
comparatively large philanthropic resources, however the establishment of the welfare
state in the 1990s meant that New Zealanders developed opinion view that
responsibility for health, education and welfare resided with the government. This left
little urgency for private philanthropy to emerge in response to social needs. However,
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because of the changing needs of the New Zealand landscape, a mixed-model of
philanthropy and the welfare state has emerged.
New Zealand is relatively new to community foundations, the first being the Nikau
Foundation, established in 1991. Nikau Foundation serves the region of Wellington,
which has a population of approximately 400,000. In 2015, the foundation made grants
totaling NZ$87,714 and held an endowment of over NZ$10 million. Today, New
Zealand has 14 community foundations, and collectively oversee fund management of
$50 million.
What is building a permanent endowment fund?
A challenge that faces many organisations is the uncertainty of where the next donation
is going to come from, and when. There is a great dependency on the generosity of
the general public and this creates a vulnerability. Community foundations challenge
this vulnerability through the building of a permanent financial pool, known as an
endowment fund.
Endowment funds consist of financial assets. These can be such things as shares,
property and cash. Endowment funds grow over time with the assistance of investment
managers and it is only the returns on the investment that are used for grant-making,
operations, and other expenses. This increases the ability of the community foundation
to survive and decreases the reliance on donations. Of course growing the endowment
fund is in the best interest of communities, and by not touching the capital of
endowment funds, a resource that aims to last forever is provided for communities.
Globally, community foundations distribute almost US$5.1 billion and hold over
US$63.2 billion in financial resources. In Oceania, the average endowment value of a
community foundation is $6,666,642. However, the size of an endowment fund is not
necessarily indicative of its success in terms of impact; it is how the community
foundation manages their activities that determines their community impact.
There are typically three types of donors to community foundations: individuals,
corporations and trusts. In terms of ways to give, donors essentially have three options:
contribute to the foundation’s endowment fund; use the foundation for immediate
gifting, or a mixture of both. Donors can also set up named funds through the
foundation. Regardless of the way they give, donor giving can be unrestricted, meaning
that the foundation determines how it should be distributed, generally based on
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community needs or aspirations; or restricted, meaning that the donor puts restrictions
on the distribution of the fund, for example it should go only to specific causes or
charities.
Where do community foundations focus their resources?
Worldwide, community foundations have a number of areas where their resources are
focused. In terms of where funding is most focused worldwide and how much goes into
each area, they can be summarized in the pie chart below. Other refers to information
technology, advocacy with authorities, conflict resolution, disaster relief, religion,
strengthening government, water, alternative energy and international relations.
What are the roles of community foundations?
Academic literature suggests that there are three main roles of community foundations.
How each individual foundation finds the appropriate balance of these roles, however,
is dependent on the community foundation and their purpose. These roles are as
follows:
15%
13%
12%
11%10%
9%
6%
3%
2%
19%
Where do community foundations focus their
funding?
Education
Human and social services
Arts and culture
Health
Environment
Children
Economic Development
Housing
Human Rights
Other
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Donor servicing: a donor-focused role that is dedicated to attracting funds from
potential donors, with the community foundation offering an avenue for donors for their
philanthropic giving. It is important that community foundations balance their duties to
donors with their duties to the community. When community foundations become too
donor-focused, they may not properly meet the needs and aspirations of the
community they serve. This is why it is critical that community foundations invest in
understanding how grants can be used to make the greatest impact and where the
needs of the community lie.
The act of Matchmaking is when community foundations act as intermediaries –
working with individuals, not-for-profits and donors to match funds with needs.
Community foundations allow donors to create value with their donations and to feel
connected to something larger than themselves that ultimately creates a sustaining
community. Community foundations create a platform from which social entrepreneurs
can gain funding with the purpose of regional philanthropic-focused development. This
opportunity for locally-grown, grassroots activism gives real power to community
foundations. It is also the job of community foundations to highlight the issues that are
being overlooked and create opportunities for those issues to be addressed.
Community leadership is the expectation that community foundations should guide
and engage their community in solving local issues using local solutions. Through this
leadership, community foundations aid communities in finding self-empowerment. The
community foundation model allows it to participate in some activities that are not
grant-making, such as facilitation of local engagement, convening community
members and advocating on behalf of the community.
Strategic Philanthropy and Community Investment
What is ‘strategic philanthropy’ and why is it useful to community foundations?
As discussed earlier, strategic philanthropy is a concept that emerged in recent years
as a way to combat the inefficiencies of traditional philanthropy, such as organisational
inefficiencies and the lack of innovation or entrepreneurial prowess. It takes elements
of the for-profit model of strategy for corporations and applies it to the not-for-profit
sector. For community foundations, the use of strategic philanthropy increases the
effectiveness of their activities. By using smart strategy, community foundations can
15. 14 | P a g e
make greater impactful change, and it is one of the ‘buzzwords’ that shows real
promise in enhancing the effectiveness of community foundations. Without the use of
strategy, community foundations hinder their ability to be a catalyst for real change;
scattered funding and impersonal relationships create a lack of awareness and
ultimate divide between the foundation and its ultimate goals.
What is needed in order for community foundations to embody strategic philanthropy
is a true cohesion between their daily activities and ultimate goals. One key to strategic
philanthropy is aiming for superior performance. Strategy is about making the most out
of what you have to best achieve your goals. Getting the most value out of every dollar
spent is critical, which necessitates foundations implementing performance measures
to understand the level of success grants have in combatting issues, as well as
undertaking research to benchmark the current status of social issues in their
community.
Strategic philanthropy requires foundations to choose unique positioning in terms of
where and how they will create an impact and align the overall strategy of the
foundation with their day-to-day operations and governance. Using the strategic
philanthropy framework, community foundations can create value for communities in
four real ways:
Implementing a rigorous assessment process for grantees. Through
implementing a stringent assessment process for grantees, community foundations
can make decisions based on how their dollars can create the highest level of social
return, therefore maximizing the value of the resources available.
Expand expertise and resources through gathering funders. Through
partnerships, community foundations are able to pool a larger base of philanthropic
resources and more expertise to engage in strategic philanthropy.
Build relationships to help improve the performance of grantees. By becoming a
fully engaged partner in the drive for social change in the community, community
foundations can become incubators for grantees. They will be able to help them in
improving their strategy, thus increasing their effectiveness in the achievement of their
vision and allowing them to make even more effective and valuable change.
Funding research and calling for innovative projects. Community foundations have
the ability to study fields in depth and use that knowledge to inform community
stakeholders. Foundations have the ability to invest in research that will spark change
and contribute to the deepening knowledge of social issues.
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It is clear, then, that in order for community foundations to be truly effective, strategic
thinking is critical. Part of strategic thinking is the necessity to understand the complex
social issues that communities face, as only once communities are knowledgeable on
the issues that face them can they identify how to address these issues.
The community foundation model has the capacity to act as a leader in communities –
a change-maker, convener and connector for grassroots activism and local
empowerment. However, really understanding these complex social issues is where
the challenge lies. Strategic community investment tools are part of the solution to that
problem. These are research tools that help in providing insights into the heart of
communities, establishing a benchmark of where communities are and where they
need to be, and identifying where to invest resources to make the most benefit for
society.
Strategic Community Investment
Strategic community investment is essentially the investment of funds that are targeted
thoughtfully, based on evidence and research, at the causes and initiatives that will
create the biggest impact. Critical to this, is not only using assets well in the present-
day, but preserving and enhancing them, so that they can be utilised well in the future
to continue to benefit the community. Strategic community investment allows for a
assessment of the investment opportunities in the community to ensure that there is
thoughtful delivery of outcomes and impact.
Strategic Community Investment Tools
A strategic community investment tool is a planning tool. Essentially, it is a tool that
allows investigation to be taken into the short, medium and long term consequences
of activities to figure out what has the most value. The following is not an exhaustive
list of the strategic community investment tools available, however will highlight three
of the tools and how they are used to manage community investment:
Vital Signs
Vital Signs is used by over 65 communities worldwide and is the most widely
recognised strategic community investment tool in the community foundation sector.
The premise of Vital Signs is simple: it is a periodical (usually annual) health check on
the region that seeks to measure and identify social, environmental, cultural and
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economic indicators. In the same way that individuals see the doctor every year to
check their health, Vital Signs checks the health of the region.
Vital Signs can have many uses, however community foundations predominantly use
it to spark conversations – engaging local people to create local solutions to local
problems and direct resources to the areas that are most at need.
In order to create a Vital Signs report, public opinion is combined with statistical data.
Quantitative and qualitative elements are published in an easy-to-consume report that
is often very visual, focusing on diagrams and infographics. This makes the information
interesting, engaging and understandable, enhancing its ability to inspire movement in
the local community.
There are twelve core indicators that can be measured in Vital Signs reports. These
show both what communities do well and also areas for improvement. However, these
are not static and can be adjusted to reflect each unique region. The indicators are:
Arts and culture
Belonging and engaging
Environmental sustainability
Economic vitality
Education and learning
Food security
Getting around
Getting started
Health
Housing and homelessness
Leisure, sports and recreation
Poverty and the gap between rich and poor
Safety and security
Vital Signs reports are not only of use to community foundations, but also to local
authorities, community members, charities and government.
Needs Assessment
Needs Assessment is a tool that measures community-wide needs. It is not restricted
to community foundations and is used by not-for-profits at large, alongside for-profits.
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The concept of the Needs Assessment is to measure the needs of a community – what
is and what should be.
The Needs Assessment tool is an academic-focused report highlighting a number of
action steps that are to be taken to satisfy the needs of the community. The data can
be collected through quantitative and qualitative methods: archives, communicative
and analytical. Because of the academic report-style display, Needs Assessment can
be more difficult to digest compared to other tools.
For Needs Assessment, there are three stages in conducting the tool.
1. The pre-assessment stage, in which it is established what information is already known
or available and what the focus should be. In this stage, known data is collected.
2. The assessment phase, in which new information and data is collected to fill the gaps
left in phase one.
3. The post-assessment, which involves creating and putting in place solutions for the
high-priority needs that have been identified before evaluating the results of the
solutions.
The benefit of the Needs Assessment is that, when well-done, it has the ability to
clearly illustrate the specific unmet needs of the region and point the community in the
right direction of where their resources need to go.
Asset-Based Community Development (ABCD)
ABCD was founded by academics and exists under a core umbrella organization, the
Asset-Based Community Development Institute. The institute provides a number of
resources and toolkits to assist with community building and implementing the ABCD
approach to help people strengthen their communities.
ABCD reviews many issues such as unemployment, failing economic politics, young
people, drugs, gambling and abuse, to facilitate the empowerment of locals to identify
their strengths and co-create social innovations. Contrary to the Needs Assessment,
ABCD focuses on the assets that a community has, not what it doesn’t have. It uses
participatory research (or action research), which involves engaging people in the
community. Action research assumes that people hold knowledge and can contribute
to their community and equips the community to actively engage members and use
this knowledge to its potential. The ABCD approach doesn’t just involve academics
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and experts – it involves a variety of people from different walks of life to work together
to create effective change.
Conversation is the key tool in ABCD. It enables listening and learning and through
this the community is able to create an Asset Map. Asset mapping illustrates the
resources that are available in the community and, once they have been identified,
empowers the community to mobilise them.
The ABCD resource kits provide frameworks for those that are looking for practical
ways to respond to the challenges that communities face. It involves the inclusion of
representatives of the entire community, particularly disadvantaged and marginalised
groups. However, the downside to ABCD is that the findings are not easily digestible
by many groups in a community.
Conclusion
Critical to understanding philanthropy is understanding how it differs from the concept
of charity. Once this difference is understood, one can see how the concept of strategic
philanthropy can be used by community foundations to understand their communities’
challenges and empower the people to make transformational and sustainable change.
This paper has provided an overview of the difference between charity and
philanthropy, what philanthropy is, what community foundations are, how strategic
philanthropy can be employed by community foundations, and a handful of the
numerous community investment tools that can be employed. Our hope is that this
paper has provided you, the reader, with an understanding of these concepts and the
ability to move forward with this knowledge in understanding philanthropy, community
foundations, and strategic community investment.
