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When it comes to private philanthropy in California, not all regions of the state are treated equally. A recent study commissioned by the Irvine Foundation found a wide disparity in foundation giving across the state: Nearly a third of counties in California received less than $10 per capita in annual giving, while the average for the state as a whole was $102 per capita.

One important way that the Irvine Foundation is addressing this disparity is through our support for community foundations, which are uniquely suited to stimulate charitable giving and build philanthropic resources in underserved regions of California.

Community foundations are tax-exempt charitable organizations created and funded by people to address the unmet needs of their community. Donors contribute a variety of assets and may recommend grants to local projects or nonprofit groups. Because of their local knowledge, community foundations can be more responsive to community needs than larger philanthropic organizations outside the area, while also serving as valued partners and resources to those
non-local organizations.

In the last 20 years, the number and complexity of community foundations has grown dramatically, in part because of favorable tax laws. Traditionally, community foundations were single endowments, created upon the death of wealthy individuals. They operated with little or no staff by a volunteer board with few restrictions on how the assets were invested. But that's no longer the case.

Today, their benefactors are more likely to be living donors who want to see what their giving accomplishes. Community foundations offer potential donors an expanding menu of "products and services" — including donor-advised funds, organization-specific endowments, scholarship funds, and community leadership projects — all of which requires them to be more sophisticated financially and more actively engaged with donors and their communities.

"There are so many opportunities today," said Rebecca Graves, a Director of FSG Social Impact Advisors, a consulting group that is working with Irvine to help community foundations develop strategies for sustainable growth. "Eighty years ago, there was one model; now there are many models. It's a new way of doing business for these organizations."

In June 2005, Irvine launched its Community Foundations Initiative II to accelerate the growth and development of nine small community foundations in regions of the state that have been underserved by organized philanthropy. (A similar initiative, Community Foundations Initiative I, was undertaken from 1995 to 2003.) Irvine awarded each of these foundation three-year grants ranging from $325,000 to $575,000. A second phase is expected in coming years.

The initiative's goal is to help these foundations grow their asset base, broaden their pool of donors, and improve their ability to mobilize resources to address community needs. It is also helping them build capacity and develop strategies for sustaining their operations as larger organizations. A portion of each grant is for regranting to local organizations aligned with Irvine's program priorities in Youth and Arts.

Today, halfway through the initial grants, the signs of progress are encouraging: All nine organizations have already exceeded their targets for asset growth, more than a year ahead of schedule. Many are expanding their operations, hiring new staff members, and taking full advantage of the opportunity for sharing information and ideas.

"We have access to a quality of assistance that we could never afford in our wildest dreams," said Susanne Norgard, Executive Director of the Community Foundation of Mendocino County, which is using a $325,000 grant to increase its ability to attract new donors and address community needs.

One important lesson has been about sustainability. Many foundations had assumed that by getting to $25 million in assets, the income from management fees would be enough to sustain the organization. But what they have learned is that not all asset growth is beneficial. To attract donors, a foundation may add new funds or services that end up costing too much to administer. The lesson is that pure growth isn't the answer; it's controlled growth and the right mix of products that counts.

"Community foundations need to ask themselves what kind of growth is viable and productive as an organization, and what kind of growth is needed for the community," Graves said. "We try to remind people that they can't be all things to all people."

Sustainability has emerged as a key issue for the San Luis Obispo County Community Foundation, the largest foundation participating in CFI II. Although it serves an isolated, rural community of just over 250,000 residents, it has experienced one of the strongest growth rates of new community foundations in the state, with assets now more than $23 million.

Until the Irvine grant, the foundation had spent little time thinking about whether it had a mix of products and fees that could keep the organization viable over the long term. "Our work with FSG led to an important revelation: our model was not sustainable," said Janice Fong Wolf, the San Luis Obispo County Community Foundation's Interim Executive Director.

Long-term sustainability is critical, she said, given that the goal is to ensure that philanthropy is always available to meet the changing needs of the community. With help from Irvine, the foundation has refocused its strategy on building its long-term endowment for greater impact.

Indeed, the San Luis Obispo County Community Foundation is taking on important challenges. One of them is a children's health initiative to help pay insurance premiums for low-income families. Another is the startup of a new dental clinic for low-income people. The foundation is also working on improving English literacy levels and on a countywide task force aimed at combating obesity among children and youth.

For Irvine, these projects illustrate one of the important strengths of community foundations, said Martha Campbell, Irvine's Vice President for Programs. "As a statewide funder, it's hard for us to fully understand the local context. Community foundations have a far better appreciation of — and can be more thoughtful about — the needs and aspirations of their own community," she said.

For more information about the Community Foundations Initiative II and a complete list of participating foundations, click here.