REACHING OUT – Funders target donors – Collaboration, technology on tap

By Todd Cohen

An alliance of 15 big U.S. community foundations is teaming up to better serve customers through technology and partnerships with financial services companies.

“Our aim is to, in the simplest possible way, advance community foundations so we’re going to be attractive institutions of choice working with donors,” says Steven Minter, president of the Cleveland Foundation and chairman of the Community Foundations Strategic Alliance.

Formed two years ago, the alliance wants to improve community foundation’s use of technology and their relationship with one another and with the financial services industry.

The alliance is talking with big money managers about working together more closely, and also might form a big clearinghouse to offer record-keeping and other services for community foundations, donors and financial advisers.

“We’re in the early stages of exploring that in much greater depth,” says Minter.

“There isn’t going to be any one answer” in working with financial services companies, he says. “There are going to be multiple answers and multiple strategies, and that’s what we’re trying to nurture and foster.”

Another goal is to improve collaboration among foundations. That could help cut the collective costs of developing new technologies that the foundations will need to better serve donors, he says.

Community foundations are big business, and growing fast. Total assets of the 556 community foundations in the U.S. exceeded $25 billion for the first time in 1998, up from $21.26 billion for the 547 foundations in 1997 and $9.7 billion for the 440 foundations in 1993, according to the most recent annual survey by the Columbus Foundation.

To help manage those assets, community foundations in recent years have formed partnerships with financial services companies.

The American Funds Group, for example, the third-largest mutual funds group in the U.S. after Fidelity and Vanguard, manages more than $200 million in assets for 90 community foundations.

The biggest player is Merrill Lynch, which manages $480 million for more than 200 community foundations through the three-year-old Merrill Lynch Community Foundation Alliance.

Financial firms clearly recognize community foundations as a lucrative market. Still, their size and growth have not prompted software companies to invest heavily in developing products for managing grants and donor-services, says Dalene Bradford, vice president for strategic initiatives at the Greater Kansas City Community Foundation and a member of the Strategic Alliance.

“Our technology has been somewhat haphazard and varies from community foundation to community foundation,” she says.

As a result, she says, community foundations lack sophisticated technology to meet growing needs in managing their finances, investments, grants and transactions.

What’s more, she says, database software currently marketed to community foundations was designed to manage assets, not to serve donors. Yet meeting the needs of donors is critical if community foundations are going to compete successfully with the financial services industry, she says, particularly as trillions of dollars are transferred to the Baby Boomers from the generation that came of age during the Depression.

Collaboration among community foundations also will be critical, she says.

 “In order to accomplish the partnerships between the communities foundations and the financial services industry that the strategic alliance is seeking to put in place,” she says, “we’re going to have to operate more as a seamless network of community foundations.”

Minter of the Cleveland Foundation hopes that by working together, foundations in the alliance can share the costs of developing integrated databases that will meet a broad range of needs.

Those needs include connecting donors with foundations in other communities and with donors in other communities who share interests; and providing access to information about best practices and evaluation in the community foundation field.

A big challenge in getting community foundations to work with one another and with financial services companies is providing consistency throughout the community foundation field in delivering services to serve donors.

The investors committee of the strategic alliance has recommended that community foundations use 19 uniform practices on such matters as administrative fees, transaction charges, standards for investment performance and the frequency with which fund statements are issued.

The idea is to make it easier for donors living in one community who may want to make gifts in another community – and thus may depend on several foundations to process the funds they create or the grants those funds make.

The Cleveland Foundation itself aims over the next year to develop a technology strategy that will integrate its Web site, online charitable giving, grant-making, access to financial information and phone and fax use.

The foundation also is increasing its support of technology use by its grant recipients.

In Los Angeles, the California Community Foundation has launched an online giving center that lets individuals contribute $25 or more to any of nine funds. The foundation also offers an online service that lets donors monitor the grant-making activity and investment performance of funds they create at the foundation.

“Technology can do for nonprofit philanthropies what it’s done for so many for-profit businesses,” says Alan Parachini, the foundation’s vice president.

“If we don’t match the competition,” he says, “we lose to the competition.”

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