Philanthropy hub

By Todd Cohen

CHARLOTTE, N.C. — Foundation for the Carolinas is remaking itself as a full-service philanthropy hub and catalyst for community change.

To better address customer needs as philanthropy undergoes sweeping changes and grows to unprecedented levels, the foundation has reorganized itself into three service centers.

Each center, including one for individuals and families, a second for nonprofits, and a third for corporations, will field individuals or teams to handle clients’ particular needs.

The idea, says Michael Marsicano, president and CEO, is to meet growing demand for charity to be more open and effective.

“You cannot live in the world today if accountability and efficiency are not at the top of your list of activities that need to be addressed,” he says.

With customers wanting better services and prices in an increasingly competitive market, the foundation aims to function as a back-office and consultant for individuals, families and organizations wanting to create, manage, invest, raise or contribute charitable funds, says Holly Welch, vice president for client services.

And as it finds itself devoting most of its time and effort to clients, the foundation also has retooled its pricing, shifting from fees based solely on the size of clients’ funds to fees based on its services.

The changes follow the first-ever national cost study for community foundations, commissioned by Foundation for the Carolinas and eight others, which found them struggling to build their customer base and revenues because of outdated services and pricing.

Developed decades ago when community foundations focused on working with donors to create funds and make grants, Welch says, their business models need to be replaced as individuals and organizations give and raise more charitable dollars, and become more involved, focused and enterprising in their charitable work.

Like many community foundations, Foundation for the Carolinas had been charging clients only a 1 percent fee based on assets in their funds, even though 400 of those 1,400 funds had balances of only $5,000 or less.

And only 40 of those 1,400 funds generated more than 80 percent of the 5,000 gifts the foundation made in 2003, creating a lot of work for which the foundation incurred costs but received no fees.

“The revenue did not cover the cost of the services,” Welch says.

Compounding that lack of revenue was the economic slump, which hurt the foundation’s investment returns and led two years ago to a projected deficit of nearly $800,000 for 2003, the layoff of four employees and a decision not to fill two vacant positions, reducing staff by 18 percent and limiting the shortfall to $150,000.

Now, the foundation, which has $384 million in assets and provides services for private foundations with another $30 million, has retooled its pricing, charging an annual minimum fee for individuals, families and corporations.

And to cover the cost of handling gifts, grants and other expenses for clients wanting back-office services, the foundation is charging a fee based both on the assets in client funds and on the number of transactions it handles.

“We charge for the work they generate,” Welch says.

To open a fund, individuals, families and nonprofits must contribute at least $10,000, and corporations must contribute at least $25,000.

Fees based on a fund’s average annual balance start at 1 percent charged to nonprofits and 1.5 percent to individuals, families and corporations, with the rate declining as fund grows.

A family creating a $500,000 fund, for example, would pay 1.5 percent on the first $100,000 and 1.25 percent on the remaining $400,000.

As part of its makeover, the foundation also aims to help donors better understand local needs and plug into innovative efforts to address them.

Growing out of a foundation initiative, for example, the Lee Institute in December will launch a “civic-engagement” process to set a “United Agenda for Children” for the next 10 years. The effort, to cost $1 million, already has raised $635,000, including $100,000 from the foundation.

And this month and next, 40 institutions will take part in “Crossroads Charlotte,” a collaborative effort the foundation kick-started and has helped fund to map the region’s future.

By creating three new centers and developing a level of “service and trust” in meeting clients’ needs, Marsicano says, the foundation can “rally folks together to pursue these overarching goals and move the community forward.”

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