Philanthropy: The Value of Creating a Family Foundation

Family foundations are not solely the domain of the Bill and Melinda Gates or Mark Zuckerbergs of the world. Many small family foundations are flexing their muscles in the nonprofit and philanthropic worlds, zeroing in on issues they care about and where they feel they can make an impact.

According to GivingUSA.org, family foundations are on the rise.      The annual report on philanthropy from the Giving U.S.A. Foundation reports: “Not only did total giving by foundations grow 8.2% in 2014, gifts from all three types—community, independent and operating—also went up. The annual changes in this category are influenced most by grants from independent foundations; their 2014 gifts were 7.8% higher than in 2013 and accounted for 74% of the category’s total.”

As middle-class offspring, particularly Baby Boomers and Generation Xers, begin to inherit their family’s wealth, many are creating family foundations to serve philanthropic causes that resonate with the family or that continue a relative’s legacy.

Marshall MacCready, who along with his siblings established the MacCready Family Foundation shortly after their father died, says it makes perfect sense to establish a foundation when assets pass to the next generation.

It was easy for us because we are a like-minded family. When we inherited the money, we sat down with advisors and spoke about our motivations. We could have taken a lump sum, and divided it between us, but when we saw the benefits of establishing a foundation it made perfect sense,” says Marshall.

Maccready-logo

Molly Knox, a MacCready family member and president of the MacCready Family Foundation, shares the sentiment echoed by other Baby Boomers who inherit money:

“My initial reaction was ‘nobody deserves this much money,’” said Knox. She and her husband, along with the other MacCready siblings, had already established careers and comfortable homes for their families.

The family agreed to create the foundation, but instead of seeding many nonprofits with smaller grants, the MacCready philanthropy strategy focuses on giving unrestricted multi-year operating grants to a handful of small, youth-focused nonprofits. The goal of giving larger grant amounts is to help often overlooked smaller organizations make a larger impact on the community they serve. The MacCready’s giving strategy is what sets them apart from other family foundations that tend to give restricted grants earmarked for a specific program and to several organizations.

The MacCready Foundation currently supports three nonprofits in the Los Angeles area: 

My Friend’s Place, which provides homeless youth with resources and a safe space; Youth Speak Collective, which gives young people a leadership role in their communities; and RootDown L.A., an initiative that focuses on growing fresh produce with youth in underserved communities. They also support the Community Science Workshop Network (CSWN) that focuses on giving Bay Area underprivileged youth the opportunity to discover science.

One of the most important things the MacCreadys have done is to help us sustain ourselves over time,” says Megan Hanson, executive director, RootDown L.A. “They gave us an initial capacity building grant and have since provided consistent contributions that help cover core operating costs and have at times been leveraged as mandatory matching funds to win federal grants. There are few foundations that do these multi-year investments and the donation is integral to our sustainability.

Helping causes the family cares about is just one of the many benefits of creating a family foundation. It also pulls the family together, fuels discussions on how the family can do more and inspires younger family members to engage with the organizations it supports. In fact, the youngest MacCready Foundation member, Knox’s college-aged daughter, is not only actively involved with the foundation but is also pursuing her own philanthropic interests. She says more than anything she has inherited a culture of giving.

My parents didn’t tell me about the foundation until I was 18 and by then it was already a lifestyle,” she says. “There’s no doubt that having this foundation is a responsibility, but with it comes the knowledge that I can help make a real difference, the benefit of positive shared experiences with my family, and meeting all the selfless people that do such good work in the world.

This younger family member spends her free time volunteering at My Friend’s Place in Hollywood and has witnessed first hand the benefits of the family’s annual grant.

Last year the MacCready Family Foundation did something no foundation had done previously with My Friend’s Place. It agreed to provide matching funds for a challenge campaign that proved extremely successful. The campaign not only raised enough money to reach the financial goals for a year, it galvanized the community to participate and helped the larger community take notice. Its success also means the creative workshops instrumental to its clients’ success have been doubled.

Scott Nelson, certified financial planner for Sagemark Consulting in California, says that it’s possible to create a private foundation with an initial gift of $5,000, far less than most people think.

There’s no doubt a family foundation keeps the family connected, especially when adult children live far from home. It’s a great way to pass their values on to future generations;” he says.

This has certainly been the MacCreadys’ experience who say operating a family foundation has exceeded expectations.

It’s been great for our family dynamic,” says Tyler MacCready. “Part of the initial process was evaluating family values. The idea of philanthropy showed up as a value and it has been so good to discuss important issues of philanthropy as a family rather than just split up an inheritance. There is no doubt our foundation brings the family together in a mission inspired by common values.”

Top Trends for Grantmakers for 2016

shutterstock_212751298

by Kerrin Mitchell, Co-founder and COO of Fluxx

Now that we’ve had a few weeks to settle into 2016, it’s time to look ahead ­– to the big ideas and trends that are likely to dominate the conversation in the philanthropic sector for the next 12 months and beyond. From billionaire tech tycoon philanthropy to the smallest crowdfunded community initiative, the year in philanthropy promises to test big ideas and, as always, refine the everyday hard work of grantmaking. Here is our, by no means exhaustive, list. Enjoy.

Tech Titan Philanthropy

Bill Gates along with British Chancellor George Osborne have pledged $4.3 billion to eradicate malaria, one of the world’s most deadly diseases. The effort re-enforces Gates’ status as the grandfather of tech philanthropy who has opened the door for others in Silicon Valley, like Elon Musk of Tesla Motors and Reid Hoffman of LinkedIn, who have formed a $1 billion nonprofit, OpenAI, which aims to research and develop “digital intelligence” projects. The alliance between the tech and nonprofit sectors is, without question, one of the bigger trends to watch in 2016, as many major players are throwing their names into the philanthropic ring. The most notable example perhaps is Mark Zuckerberg who made waves when he and his wife announced last month that they are planning to give the majority of their fortune to nonprofit causes. Focusing primarily on promoting education and community, Zuckerberg is quickly becoming one of the biggest names in philanthropy. We’re optimistic he’s taken to heart lessons-learned from his 2010 foray into education reform in Newark.

Taking Data to Heart

It’s safe to say that big data is changing the way foundations are making decisions. Long gone are the days of paper quarterly or yearly reporting. Gathering data to understand trends and predict future behavior – often in real time – will continue to be a major focus for foundations in 2016. Understanding and analyzing data can help foundations measure impact, track donor behavior, and make hyper-accurate predictions about the impact of their grantmaking. In 2016 I expect to see many more philanthropic leaders taking actionable steps toward measuring impact. The case has been made that impact measurement is of critical importance. 2016 is the year to act. Foundations like the Children’s Investment Fund Foundation, Arcus Foundation, and others are already making great strides in this area.

Impact Investing

In 2015, there was a surge of philanthropic announcements endorsing the practice of impact investing, including Kresge’s announcement of their $350 million impact investing funding pool and Heron Foundation’s public commitment to move 100 percent of their assets to impact funding. Unlike traditional grantmaking, impact investing refers to investments in companies, organizations, and funds with the intention to generate beneficial social impact alongside a financial return. In the wake of Kresge’s and Heron’s announcements, we’ll be interested to see which foundations follow through by putting all of their investments toward their missions. While philanthropists like Pierre Omidyar have been able to step outside of the bounds of traditional philanthropy in this way, it remains to be seen if foundations will do the same.

Crowdfunding Philanthropy

2015 showed us that philanthropy is no longer just for private foundations, with the enduring popularity of crowdfunding websites, like Kiva and GoFundMe, built to aid nonprofits. Then in October, Indiegogo launched Generosity, a site which allows nonprofits to gain access to crowdfunded resources without having to to pay any membership fee. This allows 100% of the money a nonprofit collects to be used for the greater good, while simultaneously lowering the bar so that people can help support causes they care about regardless of their income. Looking at all this progress, it’s safe to say that crowdfunded philanthropy will continue to grow and expand throughout 2016.

Donor-Advised Funds

According to Inside Philanthropy donor-advised funds will be as popular in 2016 as they were last year, bringing many more newcomers to the philanthropic table. Many donors love DAF’s as a way to set aside money for charitable giving and for their immediate tax benefits. However, critics of DAF’s worry that the money set aside in these accounts will never see the light of day. For a cash-strapped nonprofit that needs operating support now, DAF’s may not sound so attractive. Is this the year the critics find traction? Not likely, according to David Callahan at Inside Philanthropy.: the convenience of DAF’s will continue to bring new and younger donors into the world of giving, making 2016 another “boom year”.

Women in Philanthropy

Women’s empowerment has been a philanthropic goal for a long time, but in the past few years foundations have been making an extra effort to support women’s equality. On top of that, as women have gained a foothold in some sectors of the economy, they have also become more prevalent in the philanthropic field, and 2015 saw more women participating in grantmaking than ever before. Just to name a few – Michele Sullivan at Caterpillar turned her focus to girl’s education with WASH, the Virginia B. Toulmin Foundation is using $15,000 of grants to support women composers, and the Adrienne Shelley Foundation is providing production grants and other resources specifically for women filmmakers. We’re hoping to see these trends continue both domestically and internationally as we move further into 2016.


kerrin1Kerrin Mitchell, COO/Co-Founder

Kerrin Mitchell is the Co-founder and COO of Fluxx, a comprehensive technology platform that aims to unite foundations and non­profits worldwide. Kerrin started her career at Cisco Systems as a Finance Business Manager. After seven years of working at Cisco, Kerrin decided to join the startup world and join Sprout as VP of Operations. In 2010 Kerrin co-founded Fluxx where, in under five years, she has bootstrapped the company to year over year triple digit growth and a client portfolio of over $150B in assets. She earned a B.S. in Economics from Duke University, a Certificate in Advanced Program Management from Stanford University and a Certificate in Accounting from University of California, Santa Cruz.

 

Donor Checklist Improves Odds of Doing Good

Checkbox

By Christopher Purdy

Americans continue to be a most generous people, ranking Number 1 in the World Giving Index 2014, the only country to rank in the Top 10 for all three kinds of giving covered by the Index – helping a stranger (1st), volunteering time (5th) and donating money (9th).

In 2014, Americans’ giving to charitable organizations exceeded $350 billion, according to Charity Navigator, equivalent to 2% of Gross Domestic Product.

No doubt, that largesse does a considerable amount of good. But this generosity could have even more impact if prospective donors would consider a few issues before writing a check or punching in their credit card number. Here’s a checklist for prospective donors looking for outstanding investing opportunities in social good:

  • ___ Measurable Results and Transparency: Organizations should rigorously measure and report results that are transparently presented on a consistent basis by yardsticks such as contraceptive prevalence and maternal and child mortality. This ensures greater accountability and engenders trust by partners and donors. Look for an annual statistics recaps, like this example, on their website.
  • ___ Cost Recovery: The best programs mimic the best for-profit companies and recover a significant portion of their costs through revenues collected, and do so without sacrificing the quality of its services or the ability of poor people to use them. It’s important to ensure that programs are financially sustainable and have the financial health to endure beyond a donor’s gift. This article talks about the three steps to financial sustainability – cost recovery, cross-subsidization and profitability.
  • ___ Check Out Their Finances: Their audited financial statement and Form 990 should be easily accessible on their website. “Savvy donors ask the charity for copies of its three most recent Forms 990,” according to “Top 10 Best Practices of Savvy Donors” of Charity Navigator. “Not only can the donor examine the charity’s finances, but the charity’s willingness to send the documents is a good way to assess its commitment to transparency.”
  • ___ Entrepreneurial Spirit: Look for an entrepreneurial spirit where managers are empowered to use social marketing or others tools of the commercial marketplace to achieve a social purpose. This entrepreneurial tendency generally results in less bureaucracy and more focus on bottom-line health impact using the commercial infrastructure already in place.
  • ___ Decentralization: Look for a decentralized approach, ensuring that strategic and programmatic responsibility is delegated to field offices or employees on the ground. This allows for fast decision-making that is based on the realities of the environment. It also means fewer headquarters costs. DKT International, which I run, spends 2% of operating costs on a headquarters of less than 10 people; less than 0.2% is spent on fundraising.
  • ___ Domestic vs. International: Many people subscribe to the credo that “charity begins at home” and tend to favor domestic charities over international ones. Certainly, there are great needs in the U.S. But I believe that there are tremendous opportunities to make more impact with less money by donating to organizations working in developing countries. This article, “Your dollar goes further overseas,” explains this concept.
  • ___ Follow Up: Don’t just fork over the money and then forget about it. Check back a year later and see whether the organization has met its objectives, says GiveWell, a nonprofit dedicated to finding outstanding giving opportunities, in their “6 tips for giving like a pro.”

When giving to charity, following your heart feels good. Using your head and your heart feels even better.

Chris Purdy is CEO and president of DKT International. From 1996 to 2011, he served as DKT country director in Turkey, Ethiopia, and Indonesia, where he managed the largest private social marketing family planning program in the world.  He served as executive vice president from 2011-2013. His professional interests center on advancing the cause of social marketing for health and socially responsible capitalism.

Images: 123RF