Nonprofit Literature Blog

Foundations Moving On: A New Guide on Exits

(This post originally appeared on GrantCraft.org and was written by Rosien Herweijer, co-author of the guide Foundations Moving On: Ending Programmes and Funding Relationships)

Funders struggle with endings more than with entries. Yet, we seem have a lot of tools to support decision-making on giving grants, starting programs, entering fields and countries; however, we lack resources for developing strategies to move on. Do we actually invest enough time and thought in exits?

Probably not. Funders can still improve their exit practices considerably. As a practitioner suggested: making a ‘good’ exit is not rocket science, but it can be complicated. In a GrantCraft webinar conducted last year, none of the participants actually felt the exit they had been involved with was well planned or executed, and nearly 60% said the exit may not have been a complete surprise but could have been managed better. To support funders in rethinking their exit practices, GrantCraft has launched a new guide on exit practices: Foundations Moving On: Ending Programmes and Funding Relationships.

All funders somehow have to deal with exits. Venture philanthropist and limited-life or spend-out foundations tend to be very deliberate about exits, but other grantmaking or operating foundations also change strategic priorities, leave fields, or leave countries. And on a smaller scale, project funding ends automatically or – in rare cases – has to be withdrawn.  You cannot wait for all the complicated questions to pop-up once an exit decision looms. And once you make and communicate a decision to exit, you need a lot of answers… Read more»

Foundation Review: Faith and Philanthropy

The latest issue (vol. 4, issue 3, 2012) of the peer-reviewed journal Foundation Review was originally planned as an issue on faith and philanthropy. However, only two articles on the topic were accepted, so it is now a general-themed issue. Why were there so few submissions?  Editor-in-chief Teresa Behrens speculates that the targeted funding of faith-based programs is relatively new and little rigorous evaluation has been done. She also theorizes that these programs are somehow seen as outside the purview of evaluation.

In this post, I've abstracted five of the articles in the issue; the first two address faith-based philanthropy. You can read the entire issue at the New York Library. For contents of older issues, search the Catalog of Nonprofit Literature.

"Philanthropy in the Faith Community: Mobilizing Faith-based Organizations for Substance Use Prevention" by Ashley Townes, Kelly Firesheets, and Mary Francis. (p. 14-20)

CNL Abstract: Article describes successes and lessons learned when congregations are engaged in community-based substance abuse efforts. The Assistance for Substance Abuse Prevention Center (Cincinnati, OH) has worked with community partners in the faith community to prevent alcohol, tobacco, and other drug use; the authors outline the collaborative effort and offer advice for faith-based philanthropy.

"The Role of the Congregation in Community Service: a Philanthropic Case Study" by Mark T. Mulder, et al. (p. 21-41)

CNL Abstract: Examines a foundation funded collaborative, church-based effort in Grand Rapids, MI called the Gatherings of Hope Initiative. The study concentrates on its Family Leadership Initiative, which was charged with improving inner-city African-American and Latino children's education and strengthening their families. Article discusses the foundation's role, program evaluation and impact, and shares lessons learned.

Behrens: "initial evaluation shows high levels of satisfaction, with students reporting some academic improvements"

"Dimensions of Change: a Model for Community Change Efforts" by Jara Dean-Coffey, Nicole Farkouh, and Amy Reisch (p. 42-64)

CNL Abstract: Introduces a framework that can be used by foundations, government bodies, coalitions, or individual organizations that are initiating or engaged in substantive efforts to bring about community change. Describes the "Dimensions of Change Model" and then examines its use through the efforts of the First 5 Marin Children and Families Commission in Marin County (San Rafael, CA).

"Investigating the Roles of Community Foundations in the Establishment and Sustainability of Local College Access Networks in Michigan" by Nathan Daun-Barnett and Haley Lamm (p. 65-76)

CNL Abstract: Examines the roles that community foundations play in the creation and establishment of local college access networks (LCANs) in Michigan. LCANs are community-based coordinating bodies committed to building a college-going culture and increasing attendance and completion rates. Foundation roles include fundraising, convening, and cheerleading the efforts of LCANs.

  
"Assessing and Advancing Foundation Transparency: Corporate Foundations as a Case Study" by Marta Rey-Garcia, Javier Martin-Cavanna, and Luis Ignacio Alvarez-Gonzalez. (p. 77-89)

CNL Abstract: Article frames and discusses the topics of accountability and transparency within corporate foundations in the U.S. and Spain. It identifies and describes six drivers of increased transparency, and proposes a simple tool for assessing transparency internationally. The authors also found that benchmarking reports were a key driver for increased transparency at Spanish foundations

 --Rob Bruno
Catalog/Reference Librarian
The Foundation Center

Family Foundation CEO Guides

The National Center for Family Philanthropy is a DC-based nonprofit that helps family foundations understand and meet their governance and management needs. To further this mission, they have recently published a four-part series of reports designed to help CEOs of family foundations do their jobs more effectively. They also provide guidance for families in hiring and evaluating their leaders. I’ll describe the reports here, and also cite some other related material on family foundation management.

The Family Foundation CEO: Crafting Consensus Out of Complexity written by Virginia M. Esposito, founder and president of the National Center, is based on input from executives and attempts to create some consensus on topics such as how to conduct a successful leadership search, the qualities of an effective leader, the ideal relationiship between the board and the CEO, and other leadership issues. Apparently there is a need for such standards, as the report states that about 80% of CEOs had no orientation to their new position, the field, or the board and family. Esposito also talks about the family member as CEO and special circumstances attendant to family staff leadership, such as the difficulty in conducting a review of family members. Another helpful chapter reveals the “board chair point of view” and outlines five themes for CEO effectiveness, such as the ability to understand family culture and dynamics.

The next three reports are written by Susan Crites Price, former V.P. of the National Center. The first, Help Wanted: The Complete Guide to Hiring a Family Foundation CEO examines the search process more in-depth, and tells how to form a search committee, conduct interviews, and compose job descriptions. Price reveals that one topic that is often “tiptoed around” is family culture and dynamics. Trustees want to put their best foot forward and don’t want to say “our family doesn’t play well with others.” Talking openly about this topic with individual board members during the interview process, including nonfamily members, is quite helpful.

The First Year: The Complete Guide for New Family Foundation CEOs and their Boards of Directors focuses on the initial year of a CEO's tenure at a family foundation, and offers practical advice for a smooth transition. Price discusses how to develop strong board/staff relations, suggests ways to learn about the foundation, the grantees and the community, and emphasizes that the top priority of any incoming CEO is getting to know the family. She stresses that a CEO “can’t make a single move on program until [they’ve] done that.” Price also recommends that incoming leaders "check egos at the door," explaining that many executive directors “flame out … [when they place their] ideas, passions, and needs before those of the family.”

Lastly, Performance Review: The Complete Guide to Evaluating the Family Foundation CEO shows how boards can effectively evaluate their chief executives. This volume is more of a workbook, and includes board review documents and evaluation worksheets, as well as a year-long goal setting plan for career development. The centerpiece is the Career Development Plan provided by the Knott Foundation, which is very detailed with specific goals, action plans, metrics, and timetables that can provide structure to the incoming CEO’s first year on the job.

Taken as a whole, all four guides (found under call number 514 in all Center libraries) should be enough for any family foundation to familiarize themselves with the process of hiring, orienting, evaluating, and keeping a good CEO on board. Other works at Foundation Center libraries targeted at family foundations include the popular Family Foundation Handbook (CCH Incorporated, 2011) and the bimonthly periodical Family Foundation Advisor at the New York Library. Both give advice on a host of legal, administrative, and financial issues.

--Rob Bruno
Catalog/Reference Librarian
The Foundation Center

International Grantmaking

Making grants to organizations outside of the United States is as challenging as it is rewarding. This is due to the numerous legal and technical requirements which inhibit foundations and businesses from involvement in non-U.S. grantmaking. The Council on Foundation’s recently published Beyond our Borders: A Guide to Making Grants Outside of the United States (4th ed.) aims to help philanthropic organizations understand and meet these requirements. It is also a useful guide for international grantseeking organizations, as it can inform their fundraising efforts. In this blog I’ll give a quick tour of the book, which is newly updated and thoroughly revised due to new restrictions aimed at combating terrorism post-9/11, and increased enforcement of international sanctions.

The handbook starts with an overview of the tax code, and then examines grantmaking to IRS-recognized charities with activities outside of the U.S., the most straightforward way to fund non-U.S. charitable programs. The guide then discusses the process of international grantmaking through direct corporate giving programs, public charities, and private foundations. I’ll summarize the book’s advice to private foundations as this may be most pertinent to the Foundation Center’s clientele.

Chapter 6, “Grants by Private Foundations” starts out by listing the best options for making grants to non-U.S. organizations, such as making a grant to a donor-advised fund that works with international charities, or making grants to a “friends of” organization.

The process for making grants to non-U.S. organizations not recognized by the IRS is clearly the most onerous. This section alone is over ten pages and lists the technical and legal requirements that often hinder the involvement of U.S.-based grantmakers. The two primary options for foundations are (1) making an equivalency determination of the potential grantee, or (2) exercising expenditure responsibility, which is easier (in most cases) than completing the equivalency determination. The chapter also looks at grants to governmental units, grants requiring special attention, and concludes with a matrix that outlines the types of non-U.S. organizations a private foundation can and cannot fund, and what granting options are the best for each type.

Multiple appendices contain helpful sample documents (i.e. grant agreements and an affidavit for equivalency determination) and explain in more detail key legal rulings affecting international grantmaking. One appendix includes a list of international organizations designated by executive order, all of which may be treated as public charities--meaning grants may be made to them without special procedures.

While Beyond Our Borders is essentially a legal handbook, it is required reading for those interested in the nuts and bolts of international grantmaking regulations and procedures. It can be found in all Foundation Center libraries under Call Number 330 EDI 2011.

Related publications include Jonathan R. Moore’s A Practical Guide to International Philanthropy (Cambridge, 2010) as well as the Foundation Center’s The Global Role of U.S. Foundations (2010) and our International Grantmaking series.

--Rob Bruno
Catalog/Reference Librarian
Foundation Center--New York

Guidance for Small Foundations

The Association of Small Foundations is a membership organization for donors, trustees, employees and consultants of foundations that have few or no staff. Since 2005 they have published the “Primer Series” that includes brief papers on key topics of interest to small grantmakers. I’ll review two recently acquired titles here.

The primer Strategic Uses of Donor Advised Funds by Ruth Masterson (2010) explains how donor advised funds (DAFs) work and how foundations managers can use them to further their organization’s philanthropic goals. It also looks at the process of opening a DAF.

What are Donor Advised Funds? DAFs are “accounts held within and managed by another organization, namely, a public charity known as a sponsoring organization.” Then, on behalf of their donors, the sponsoring organization administers the account, holds and invests contributions, and makes grants from the accounts to other public charities.

One way a DAF can be used is for making grants outside of a foundation’s mission. While in practice private foundations are used for more strategic, mission-focused grantmaking, DAFs are ideal for “informal, responsive giving.” An example of this is in response to an international tragedy (like the recent Tsunamis in Asia, or the Haiti Earthquake). A U.S.-based foundation deeply involved with local issues wishing to contribute funding may not have the time to identify fitting intermediaries, so they set up a DAF account at a national sponsoring organization to identify suitable grantees.

Strategic Uses also highlights other ways DAFs can be utilized by small foundations, such as honoring a legacy, highlighting an important cause, or giving after a foundation has ceased operations to avoid penalty taxes upon closing shop.

The second primer is titled Getting to Impact Through Planning by Sara Beggs (2011). It introduces planning options for foundations looking to make the biggest possible impact with the resources at hand.

“Impact” is defined as “a significant positive effect” that usually is only carried out using thorough strategic planning. It rarely happens accidentally or immediately, and typically requires multiple grants and multiple non-grant activities for an extended period. This primer sets out a road map small foundation can use to align its operations and grantmaking to achieve such impact.

The author illustrates how to sync governance and grantmaking  by outlining the strategy behind the funding of a college prep program (p. 31-32). For example, governance may want to invite an additional trustee with experience in this area; those with tax and legal responsibilities should review bylaws to ensure relevance; and investment managers may need to shift them for sufficient cash flow. On the grantmaking side, the work plan spells out the steps from discussing grant program details with staff and board through the creation of a web page to communicate guidelines to potential grantees.

The appendix to Getting to Impact includes an 11-page workbook that offers a framework for all planning needed to execute impactful operations and grantmaking at a small foundation.

Both Strategic Uses of Donor Advised Funds and Getting to Impact Through Planning are available at  Foundation Center libraries under call number 510 ASF.

Related resources include the previously blogged book Managing Foundations and Charitable Trusts: Essential Knowledge, Tools, and Techniques for Donors and Advisors by Silk and Lintott (Bloomberg Press, 2011); it devotes an entire chapter to DAFs.  For impact planning in foundations, try TCC Group’s Maximizing Foundation Effectiveness: Aligning Program Strategy, Organizational Capacity, Strategic Planning, and Performance Assessment to Achieve Success.

--Rob Bruno
Catalog/Reference Librarian
The Foundation Center--New York

Managing Foundations and the Risky Business of Philanthropy

Technically a revised and expanded edition of their previous work Creating a Private Foundation (2003), the new publication Managing Foundations and Charitable Trusts by Roger Silk and James Lintott now takes into account recent challenges facing philanthropists in the current economic downturn.

Primarily written for those contemplating creating a new foundation or who already have a foundation, charitable trust, or other charitable entity, Managing Foundations covers the basics of charitable giving, the business of philanthropy, and provides descriptions of various planned giving vehicles. It also gets into the nuts and bolts of investing and asset allocation, donor-advised funds, and Charitable Remainder Trusts (CRTs).

There is much here for the general reader as well.  The Bernard Madoff scandal was for many the symbol of everything that went wrong financially in late 2008, and it had a large impact on foundations, jeopardizing the investments of at least 23 charities. In the chapter “Fraud, Inflation, and Market Risk” the origins of his Ponzi scheme are explained in detail, revealing that Madoff may have “strategically targeted private foundations because of the 5% payout rule.” Since many foundations adhere to the rule (spending at least 5% of assets every year) Madoff would only need a fraction of their assets on hand for withdrawals.  This helped sustain the Ponzi scheme even longer than otherwise possible. The authors state that the scheme served as a cruel reminder that investors “need to concern themselves not merely with issues of return on capital, but more fundamentally with the issue of return of capital.”

Another chapter covers unintended consequences of charity, or “The Road to Hell.” Starting with an explanation of how well-intention government programs (i.e. sustainable biofuels) can lead to adverse results (increased starvation of the world’s poorest people) the book lays out how the same can happen to private charitable giving. For instance, some felt that the Bill & Melinda Gates Foundation's AIDS program in Africa had the unintended consequence of leaving gaps in the supply of services for non-AIDS medical issues.  How can this be avoided?  One suggestion is that philanthropists focus more on programs that alleviate poverty, instead of on the conditions/manifestations of poverty such as preventable disease.

So, while intended for donors and philanthropic advisors, Managing Foundations can also serve as guide for grantseekers who want to know more about the motivations, concerns, and challenges of grantmakers in times of financial instability.  It’s also hopeful. The authors are quick to point out in the preface that despite the stalling economy charitable giving is actually higher than it was ten years ago and thriving.

Managing Foundations and Charitable Trusts is available at the Foundation Center's New York, DC, San Francisco and Atlanta libraries under call number 514 SIL MAN.

 

Rob Bruno
Catalog/Reference Librarian
The Foundation Center--New York

 

Here is a Google Books preview:

The Impact of Foundation Giving

Helmut Anheier and David Hammack’s newly released book, American Foundations: Roles and Contributions, is the product of a three-year project supported by the Aspen Institute’s program on the Nonprofit Sector and Philanthropy and brings together numerous specialists to evaluate the impact of foundation giving in a variety of subject areas.  

Selected articles include "The Robert Wood Johnson Foundation’s Efforts to Improve Health and Health Care for All Americans" by James R. Knickman and Stephen L. Isaacs; "The Role of Foundations in Shaping Social Welfare Policy and Services: The Case of Welfare Reform" by Jennifer E. Mosley and Joseph Galaskiewicz; and "For the World’s Sake: U.S. Foundations and International Grant Making, 1990–2002" by Lehn M. Benjamin and Kevin F. F. Quigley.  Other articles cover the role of U.S. foundations in the areas of education, the arts, religion and social movements.  You can find the volume in our libraries under call number 407 ANH AME.

Note: If you are interested in learning more on this topic, join us in New York for a free event with the book's editors and other experts: A Century of Good? 100 Years of American Foundations (Jan 12, 2011). Click here to register. 

Robert Bruno

Catalog/Reference Librarian, The Foundation Center

Here is a Google Books Preview  

 

Media Funding Trends

Grantmakers in Film + Electronic Media (GFEM) has released a report, Funding Media, Strengthening Democracy: Grantmaking for the 21st Century. The publication explores the size and scope of media funding, based on background research, an online survey, roundtable discussions, interviews, and data-sharing with journalists and other researchers. Recommendations for media grantmaking are also included.

 

The report breaks down media into three main categories:

-media content (information and artistic material)
-media infrastructure (institutions, associations, and individuals that produce and distribute the content)
-media policy (regulations related to communications)

 

You can access the full report and examine the research findings by visiting the GFEM web site.

How Small Foundations Can Make a Difference

If you are preparing for a planning meeting for your foundation, ask our librarians to show you the new primer, Twenty Ways to Make a Difference: Stories From Small Foundations.

You can use the paper as a starting point to promote discussion among your board or staff as you develop strategies. The guide explores a number of topics, such as advocacy funding, international giving, program-related investments, capacity building, collaboration, and mission investing. Find out how other grantmakers are exploring these approaches by browsing more than 35 examples.

The paper is part of the Primer Series published by the Association of Small Foundations.

New Discussion Guide for Grantmakers

Grantmakers for Effective Organizations has released a new booklet, On the Money, to help funders explore options for improving the financial stability of nonprofit organizations. The first section examines several key challenges for charities, including funding restrictions and the knowledge gaps in nonprofit finance.

Section two of the publication helps grantmakers understand that their concerns over accounting rules, evaluation, sustainability, trust, and foundation perpetuity may limit their full philanthropic potential. The final section explains the approaches foundations can take to learn from grantees, streamline grantmaking practices, and use other financial tools such as program-related investments.

The booklet contains discussion questions for grantmakers, a glossary of major terms, and an extensive bibliography.

On the Money: The Financial Challenges Facing Nonprofits Today – and How Grantmakers Can Help is available for download at the Grantmakers for Effective Organizations web site.