Community Foundations Make Their Mark!

Overseas experience has shown community foundations to be alive and well and playing a key role in a nation’s philanthropic process. They are still relatively new here but as the Melbourne Community Foundation has found, its own concept is helping pioneer a new era in Australian philanthropy.

By way of comparison the latest statistics from the United States are impressive.

US community foundations manage more than $30 billion in assets and were responsible for more than $2 billion in charitable giving in 2000. More than 550 of them are located in the United States alone, representing both major metropolitan areas and rural neighbourhoods.

Community foundations exist as a means for local citizens to make a difference in their communities, managing funds to ensure that every charitable dollar contributed generates the greatest possible impact over an extended time.

Philanthropy Australia describes a community foundation as an independent, charitable organisation formed to collect and distribute gifts from a wide range of donors to meet critical needs in a defined geographic area. It is a vehicle for local donors who wish to contribute cash, trusts, bequests or property to create permanent endowments that will benefit the community in perpetuity.

Using the investment earnings on each endowed fund, a community foundation makes and builds permanent funds from which grants are made to local charitable and community organisations. These funds function much like permanent community savings accounts, where the community – personified in the Board and its decision making bodies – has the say over how to distribute the earned interest.

Community Foundations are governed by a Board of Directors made up of voluntary leaders representing a broad cross section of the community.

Not surprisingly the idea originated in the United States. There, community foundations have been around for more than 75 years and now constitute one of the fastest growing sectors for charitable contributions in the country.

In Australia they appeared only a decade ago and the number of players is still relatively small. One of them showing the way is the Melbourne Community Foundation which believes it has helped to pioneer a new era in Australian philanthropy – an era that is more flexible and better geared to the transfer of wealth from one generation to the next.

Chairman Hayden Raysmith says MCF now has $11 million under management in just five years, showing a 20% growth and providing $1.8 million in grants over that time.

Raysmith says MCF is proving unique in its concept. Many community-based funds are largely involved in will writing and handling bequests providing the option to leave money but are not active with living donors.

He says Melbourne Community Foundation is strongly connected with the community it serves dealing with living donors who are active in their fields of interest and provides a vehicle for people with modest means who may not be able to operate an independent trust.

Raysmith says the concept involves significant strategic philanthropy where it devotes time in helping to make the best use of donations or investments, linking donors with each other or other trusts.

And the concept has caught on.

Raysmith says MCF had set a high-bar of $5 million in three years and $10 million in six years, and so far it has been ahead at both targets.

Some of the key successes of MCF are:
• being a leader in promoting the advantages of people establishing trusts in their lifetime.
• provided a mechanism for people of moderate means.
• removal of all entry fees and up-front costs
• establishing a low cost Not for Profit trustee company with administrative fees capped at 1% p.a.

For many small Not for Profits that are struggling with maintaining small Trust funds, this concept is proving very attractive.

The flexible umbrella trust structure and pooled investment strategy, pioneered by the MCF and its forerunner, the Victorian Community Foundation, has now been replicated by most banks and trustee companies and has opened the way for wider marketing and a rapid expansion of philanthropy in Australia.

Added to this have been the Federal Government’s helpful decisions on franking credits, GST and the new provision for ‘private prescribed funds’.

Raysmith says although this expansion of players and products has increased competition there is recognition that there is plenty of growth to come and collaboration between many of the key funds and trustees remains high.

There are advantages in sharing information and discussing best practice issues. MCF is part of the close knit Horizons Group, which includes the Reichstein Foundation, Women’s Trust and Education Foundation, and which discusses contemporary and emerging issues drawing on leaders in their field.

MCF also maintains a close working relationship with ANZET and Perpetual Trustees. This changing context, however, also challenges the MCF board to address the question of ‘what is unique about the MCF and where should its efforts now be focussed?’.

In broad terms the answer lies in the Foundation’s relationship with its donors and supporters and the recipients of grants. It is after all a “community foundation” and is as much a family as it is a financial institution. Its reason for being is to build better and stronger communities, not simply raise funds and make grants.

Raysmith says another aspect of its success is that so many good role models are prepared to talk publicly about giving to MCF.

He says people like Eva Wynn who has spoken to other women about inherited wealth, Jim Hart a co-founder of Lonely Planet who retired and started small but now has a substantial fund, and legal experts such as Ronald Merkel QC who has been prepared to talk to his colleagues about MCF.

Raysmith says it’s in the area of donor services and community relations
that MCF expects to make a difference and remain at the cutting edge.

For more information go to www.communityfoundation.au.
Other Community Foundation gateways can be found at www.philanthropy.org.au.