Building Philanthropic and Social Capital: The Work of Community Foundations

By Verlag Bertelsmann Stiftung

The book presents the work and development of community foundations in an international perspective. It comprises essays on the history and spread of the community foundation movement, on the role of community foundations in fostering social capital and civic engagement and on key aspects of the day-to-day work of community foundations, such as asset development, donor services and marketing.
The book will be of value and interest to community foundation professionals, donors, advisors and all who are interested in community philanthropy.
With contributions from Mary Command, Lewis M. Feldstein, Donnell S. Mersereau, Helen Monroe, Eleanor W. Sacks, Thomas H. Sander and Shannon E. St. John.

• Language: English
• Publisher: Verlag Bertelsmann Stiftung
• Release date: Jul 30, 2010
• ISBN: 9783867932332

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www.tcfn.efc.be.

An International Perspective on the History, Development and Characteristics of Community Foundations

Eleanor W. Sacks

1. Introduction

In the last several decades, there has been a paradigm shift in how governments go about meeting the social needs of their citizens. Around the world, national governments are retreating from direct responsibility for the funding and delivery of social services. They are privatizing delivery systems, working through intermediaries such as nongovernmental organizations (NGOs), devolving decision-making to local authorities, and asking communities to develop their own resources.

Communities are searching for ways to meet the challenges of this new environment and to find longer-term, sustainable sources of funding for human needs. Instead of relying primarily on informal acts of charity, increases in the local tax base, or the interests of funders, communities are exploring the establishment of community philanthropy organizations that collect, manage and distribute charitable resources for their local areas. As a result, community foundations have become one of the fastest-growing forms of organized community philanthropy today.

Community foundations are not a new idea; the first modern community foundation was formed in the United States nearly 95 years ago.⁶ However, since the mid-1990s, they have experienced tremendous growth around the world, as individuals and institutions recognize the advantages community foundations have for building a permanent pool of charitable funds. The community foundation concept is flexible and adaptable, able to meet current needs and the changing needs of communities over time. It has shown the ability to adjust not only to local conditions but also to the local impact of change from external forces, such as the ups and downs of economic cycles, the effects of globalization, the decline of centralized, social welfare programs, and evolving political, cultural and nonprofit environments.

Today, the total number of community foundations worldwide is over 1450 in about 46 countries, and the concept is being explored in many others.⁷ Even in countries where community foundations have had a long history, their numbers and assets have increased dramatically in the last 10 to 15 years. In order to understand why the community foundation concept has been accepted in so many parts of the world, this essay will explore the history of the community foundation movement and examine the unique attributes of community foundations, the factors that encourage community foundation development, and the roles that funders, support organizations and associations of grantmakers play in spreading the community foundation concept.

2. The Unique Character of Community Foundations

Community foundations have a number of characteristics in common. Even so, no two community foundations are exactly alike. They are shaped by local traditions, history and culture to meet the needs of their local areas. Even in regions where they have been established for the longest period of time, variations in structure and emphasis have developed. The adaptability of the concept makes it possible for each country and area to shape its community foundations to fit its unique circumstances. Some community foundations will display most but not all of the characteristics listed below. Others will place a greater emphasis on one characteristic over another.

Community foundations:⁸

• seek to improve the quality of life in a defined geographic area;

• are independent from control or influence by other organizations, governments or donors;

• are governed by a board of citizens broadly reflective of the communities they serve;

• make grants to other nonprofit groups to address a wide variety of emerging and changing needs in the community;

• seek to build a permanent resource for the community, most often through the creation of endowed funds from a wide range of donors, including local citizens, corporations, governments and other foundations and nonprofits;

• provide services to donors to help them achieve their philanthropic goals;

• engage in a broad range of community leadership and partnership activities, serving as catalysts, convenors, collaborators and facilitators to solve problems and develop solutions to important community issues;

• have open and transparent policies and practices concerning all aspects of their operations; and

• are accountable to the community by informing the general public about their purposes, activities and financial status on a regular basis.

3. Influences on the Dynamic Growth of Community Foundations from the 1990s Onward

Among the most dramatic developments in the early 1990s were the sudden collapse of communism in Central and Eastern Europe and the breakup of the Soviet Union, which brought about an urgent need to create new political, economic and social structures in order to integrate former totalitarian countries into Western political and economic systems.

At the same time, democratic governments began replacing dictatorial regimes in other parts of the world, particularly in South America and Africa. The emergence of new democratic states gave rise to a movement for greater citizen participation and citizen action. Less dramatic but no less momentous were the Western democracies’ beginning to turn away from the welfare state.

The 1990s also saw large international funders change their ideas about how best to bring about lasting change at the local level. They began to reject top-down approaches that involved designing and managing large-scale social and economic programs themselves. They came to believe that it was more effective to focus on priorities and to turn the operation of programs over to local NGOs, which would be better able to identify local issues and find solutions that were tailored to work in their local circumstances. As governments and funders retreated from direct involvement in economic and social programs, there was an explosion in the numbers of NGOs created to deliver programs and services. The end of the Cold War also saw foreign-aid budgets drastically reduced, as the competition for allies retreated in importance, leaving many poorer nations with severely diminished finances with which to provide for the needs of their people. All of these factors led funders and countries to look for new ways to build and sustain resources locally.

At the same time, the rise of globalization has lead to a decline in the power of the nation-state. Technological advances have increased the speed of communications and the ability to communicate globally, resulting in increased interconnectedness. These same advances have enabled countries to compete in a global market for manufacturing, goods and services. In a globalized economy, nations are finding that they cannot continue to spend large portions of their gross domestic product on social services.

Many countries also have concluded that programs designed and run by centralized bureaucracies are not effective in identifying and addressing local needs. The result has been an increase in local responsibility for decision-making based on the belief that those closest to the situation will find the most effective solutions.

In the wake of these developments, a consensus has begun to emerge globally that no single sector can do it alone. Governments, the private sector and nonprofits are recognizing the need to share the burden of solving the persistent needs of their communities. In this new economic and social environment, the role of governments is primarily to provide a social safety net. The private sector assumes responsibility for creating jobs that allow individuals to earn a living and acquire wealth. NGOs and philanthropic organizations play their part by identifying local needs, gathering local resources, and providing a conduit for national and international funding. They also act as incubators for new ideas and approaches to solving community problems and as advocates for policy changes that strengthen local communities.

All of these changes to the world’s political, economic and social systems in the last two decades have created an opportunity for community foundations to play a leadership role in their communities. When local citizens understand that they cannot rely on national or local governments to provide for them, they realize that they must rely on their own resources-both human and financial-to identify and address the issues that are of greatest concern to them. Community foundations, characterized by their focus on local asset development, local control and local decision-making, are uniquely suited to this way of operating. The dramatic growth in the number of community foundations in the last two decades has shown that community foundations have been seen by local leaders and international funders as an effective means for easing the transition to this new environment.

4. The Role of Funders, Support Organizations and Associations of Grantmakers in Spreading the Community Foundation Concept

The development of community foundations globally could not have taken place in such a short time without the leadership role played by funders, support organizations and associations of grantmakers in promoting the community foundation concept and supporting community foundation development.

In Western Europe, most community foundation development initiatives have come from large national and regional foundations, such as the Charities Aid Foundation in the U.K., the Fondazione Cariplo in Italy and the Bertelsmann Stiftung in Germany. Support from large international funders, such as the Charles Stewart Mott Foundation and the Ford Foundation, also has been helpful, especially in establishing programs and providing resources for the development of national and transnational support organizations, such as the European Foundation Centre.

The fall of communism and breakup of the Soviet Union provided a major challenge for international funders: how to help these countries make the transition. They developed training programs for governments and individuals on how to create new economic and political structures. They saw a need to encourage citizen participation and citizen action at all levels and addressed this by creating programs that promoted democratic concepts, citizen participation in government and support for civil society and the voluntary sector. The successful transfer from North American to the United Kingdom of the community foundation concept (discussed below) gave funders the confidence that this form of institutionalized community philanthropy could play a pivotal role in helping bring about transformation at the local level.

National and international funders became a powerful force in promoting the community foundation concept and did much to accelerate community foundation formation. A broad spectrum of funders have seen value in the concept. Private foundations have played a prominent role, as have government aid agencies, especially in the former Eastern bloc countries. In addition, national governments, government entities, local authorities and local, national and multinational corporations also have seen the benefit of the sustained funding for local initiatives that community foundations provide.

International funders first focused their development efforts in Russia and the countries closest to Western Europe that had a prior history of political independence and democratic traditions: Estonia, Latvia, Lithuania, the Czech Republic, Poland, the Slovak Republic and Hungary. As these countries graduated from programs aimed at supporting citizenship and civil society, funders