In 1986, the Council of Michigan Foundations (CMF) established two board level committees. One committee focused on “improving” the operations of philanthropy. The second focused on “increasing” the amount of philanthropy.
While related in membership and ethic, the two committees worked on different agendas. To accomplish their goals, a philosophy of inclusion framed all of the activities of CMF, sometimes to the discomfort of the foundation members themselves. Including all donors and foundations meant that sometimes CMF members felt a family foundation was too small or a community was too small and isolated to be able to have a successful foundation. CMF’s philosophy was to honor the donor (or the community of donors) and their wishes rather than to try to control the legal form of charitable giving.
The core of this belief was that all philanthropy was to be valued and supported without the CMF staff or board judging the size, organizational form, or focus of the giving.
Video: Watch leaders discuss the movement to value all philanthropy.
The gift belonged to the donor, not to the preferences of the CMF board members or staff. This philosophy had been established early on in CMF’s formation when a small family foundation, the Dyer-Ives Foundation of Grand Rapids, and large and small community foundations had been included with the largest of the private foundations in the initial conversations about founding CMF. Scale was never an issue – inclusion was the value.
This welcoming environment for a broadly diverse range of donors and foundations created a vibrant atmosphere at the CMF annual conferences. The panoply of donors and types of foundations encouraged every potential donor who had some financial means and the heart to give back to change the world, to begin their giving, to seek CMF’s technical advice, and/or to engage in the broader community of philanthropy in the state.
When organizing a new initiative, such as the Michigan AIDS Fund, the Council of Michigan Foundation’s (CMF) philosophy helped to bring together program officers from very different foundations to focus on a common cause. While funding from each of the partner foundations was of very different scale, care was taken that everyone who participated felt an equal ownership of the joint project.
CMF consistently held to its philosophy that size, organizational form, type, and the focus of foundation giving was up to the donor. Honoring this principle has made all the difference in its work.
Roughly, there are two major types of legal structures for foundations – public charities and private foundations. The distinctions are defined in the United States Tax Code. The word “foundation” itself has no specific meaning, and is also frequently used by nonprofit organizations that are raising money, rather than those that are giving money away. The Council of Michigan Foundations limited its field of interest to the foundations that primarily give money away for broadly defined charitable purposes.
The foundations defined as public charities have greater tax benefits for donations and fewer operating restrictions than private foundations. This is because it is assumed that the public is engaged in the foundation and provides a level of oversight on the operations that exceeds what the IRS could do through more regulations. Because public charities are required to raise a portion of their income each year from many sources, they must make their operations more transparent than is required of the private foundation.
The types of public charity foundations that are potential members of CMF are:
Prior to the Michigan Community Foundation Tax Credit of 1988 (which was expanded in 1994), community foundations had been treated similarly to all public charities in terms of regulation. Thus they received beneficial federal tax treatment. The tax credit allowed gifts of up to $100 for individuals — and up to $200 for couples filing jointly — to be deducted directly from the givers’ Michigan taxable income. While existing community foundations and the field had views on the appropriate role and operations of community foundations, it was internal and of little consequence to legislators. What was in agreement was that the community foundations would hold endowment for the community, composed of many gifts from local donors; award and administer grants; provide civic leadership; and serve a community mainly defined by geography. Following the tax credit, a legal definition was formed to differentiate community foundations from other 501(c)(3) organizations.
In 1979, the Charles Stewart Mott Foundation in Flint, Mich., a founding member of CMF, provided a large grant to the national Council on Foundations to provide technical assistance to community foundations nationwide. One of the national myths was that it wasn’t possible to operate a successful community foundation in a community of less than 150,000 people. The majority of Michigan’s community foundations, and some of the largest in terms of assets, did not meet this arbitrary national population threshold. This meant few Michigan community foundations were qualified to receive technical assistance through the national program.
A joint study, initiated by CMF in conjunction with the Council on Foundations, “Small Communities-Great Community Foundations,” documented the fact that the size of the community does not define the size or quality of the community foundation. While it took many years (and still may not be fully accepted by the metropolitan foundations), because of CMF’s leadership, a new understanding of success was defined. Other metrics (such as the ratio of community foundation assets or grants to the size of the population, the ratio of the benefit return to the community, or the success of local leadership) have developed as alternative measurements of success rather than relying entirely on the size of the community to determine a community foundation’s value.
Historical Document: Read an overview of community foundation grants from the W.K. Kellogg Foundation and the Charles Stewart Mott Foundation in 1988.
The key, defining characteristic for a community foundation was redefined away from scale (assets and size of community) and was refocused on the sound management of the foundation, the core services provided no matter what its size, and the good it was returning to the community it served.
CMF’s proactive interest encouraged the Charles Stewart Mott Foundation to consider and to later fund technical assistance for development of community foundations throughout Michigan. The technical assistance grants were given as companion grants to the W.K. Kellogg Foundation challenge to develop community foundations and youth grantmaking committees.
Historical Document: See the Council of Michigan Foundations Annual Report for 1988 – 1989 to read about the technical assistance grants made to community foundations and the Michigan Community Foundation Tax Credit.
In 1988, the community foundation members of the Council of Michigan Foundations (CMF) agreed to jointly ask the W.K. Kellogg Foundation for a challenge grant pilot program that would help them to grow their permanent unrestricted and field-of-interest endowment funds. The Kellogg Foundation responded with interest, provided that the community foundations could find a way to engage young people as grantmakers. The resulting project, the Michigan Community Foundations’ Youth Project (MCFYP), had two major components: 1) the development of community foundations and 2) the engagement of youth.
Video: Watch leaders discuss the development of community foundations in Michigan.
Additionally, CMF and its members successfully obtained a tax credit for smaller donations to community foundation endowments. Because of the nature of community foundations, as managers of a portfolio of different types of endowed funds, the Michigan Community Foundation Tax Credit could be extended to local charitable organizations that set up endowment funds for their organization within the community foundation. At the community level, hundreds of nonprofit organizations developed for the first time (or built more rapidly) endowed funds to help stabilize their budgets over time. These endowments were built mainly on small gifts of $200 and $400, which qualified for the tax credit in the community foundation. This incentive, coupled with the challenge grants from Kellogg, made it very attractive to establish a community foundation.
Video: Watch leaders discuss the Michigan Community Foundation Tax Credit.
With up to $1 million available to each community from the Kellogg Foundation challenge, interest in establishing community foundations blossomed across the state of Michigan. A part of the challenge grant was the goal of CMF, supported by the Kellogg Foundation, to extend the benefits of community foundation service to every donor and nonprofit in the state of Michigan. Many civic foundations, booster groups, and single communities of interest (for example, the Jewish Federation or Women’s Foundation) relabeled themselves as “community foundations.” These organizations – while worthy in their work – did not have the characteristics of a community foundation. Many were fundraising organizations for local governmental and civic ventures or were focused only on one segment of society.
In order to administer the Michigan Community Foundation Tax Credit, the State of Michigan Department of Treasury needed to have a set of measureable standards and observable characteristics to determine if an organization was really a community foundation or another type of public charity. A number of organizations attempted to adopt the community foundation label in order to qualify gifts for the challenge grant and/or the tax credit. CMF worked closely with the state of Michigan to write the first tightly drawn definition of a community foundation.
Over time, this definition provided the basis for a set of operational standards that are not based on scale, but on the provision of appropriate community foundation functions. This definition has grown into Michigan standards. The Michigan standards for community foundations served as a basis for national standards and certification.
Video: Watch leaders discuss the standardized definition of “community foundation.”
For some civic foundations, operating very close to the definition of a community foundation, CMF worked with their boards to convert their organization into a fully functioning community foundation that qualified for the W.K. Kellogg Foundation challenge, the Charles Stewart Mott Foundation technical assistance, and the Michigan Community Foundation Tax Credit for small donations.
The next 20 years required CMF to engage in ongoing negotiations with members, potential members, and to manage conflict. Some communities, many in very small rural areas, actually were too small to have an endowed community foundation – but these local donors and leaders had deep pride and ownership of their communities. Often there were long-standing, historic issues and animosity among these small communities and their neighbors. One answer would have been to require the communities to merge their assets into one entity in order to qualify for the challenge grant and the tax benefits.
Another approach, taken by CMF, was to experiment with alternative organizational structures that would allow each community to have an identified and segregated component of a new type of umbrella community foundation. The easier road would have been to simply insist that a community meet a set “model” in order to participate and to deny access to the challenge or other services if they did not. The more difficult, but ultimately more productive, path was to live within the dilemma of scale/quality and to work out new solutions that respected both the need for high quality and honored the small donor and the smaller community interests.
In other situations, a larger community located adjacent to a smaller community agreed to extend their service area. In this arrangement, the smaller community’s gifts were legally a component fund of the larger neighbor, but the local gifts remained designated for the use of the smaller community. A local advisory board was put in place to make grants in the smaller community, as well. This allowed the smaller communities to access the tax credit for gifts from their donors and benefit from the advantages of professional management and scale, while keeping local charitable gifts local.
Video: Watch leaders talk about community foundation dynamics in their area.
The W.K. Kellogg Foundation supported these efforts by approving challenge grants to the component geographic funds as if they were separate organizations. Honoring the smaller community and donor took away the financial incentive to “go it alone” while creating the organizational necessity of a minimal level of scale.
The W. K. Kellogg Foundation also approved a strategy that allowed the community foundations to apply for smaller amounts of money (as little as a $10,000 challenge to be matched by $20,000 locally), and to do so multiple times with the maximum to be a total of $1 million. Each challenge was an “all or nothing” challenge. If the challenge was not met, the foundation could still apply for a smaller amount in their next request. There was no penalty for not meeting their initial goal. For the small or new community foundation, the option of taking on and meeting a smaller challenge helped them to gain confidence and skills in fund-raising. This experience also prepared them to take on a larger challenge later, all the while increasing community awareness of the importance of philanthropy.
The rules for the Kellogg challenge were designed in collaboration with experienced community foundation leaders to be as supportive of giving and the foundations’ development as possible. This was a partnership with a big goal, implemented locally, with sufficient support provided to achieve success. A key to the success of MCFYP was the “outside” nature of the challenge grants. Residents of local communities were weary of paying taxes and making loan payments to entities outside of their communities. They were highly motivated by the prospect that the challenge, if triggered by a successful local match, would cause outside money to flow into their community.
In some localities, community foundations that were serving large geographic areas found that smaller communities within their service areas wanted to have their own community foundations. The community foundations handled these conflicts in two ways. In some communities, the community foundation met with the local leaders and established a geographic component fund, similar to the model that was set for extending a community foundation to help a neighbor.
In other areas, the community foundation did not want geographic funds within the greater service area, and actively resisted their formation. For CMF these situations created a dilemma. Should technical assistance be offered to the smaller community? Should the Kellogg challenge grant be offered? Should the smaller community be assisted in order to qualify their gifts for the tax credit? Would their current, and larger, community foundation members be angry with CMF for helping? The principle that trumped all other arguments in these situations of conflict was the money belonged to the donor and it was up to the donor to decide how, where, and what they wanted to support. If a group of donors wanted to set up a community foundation for their community – CMF would help.
Establishing and managing a private foundation can be a time consuming and difficult task. In some situations, a family would come to the Council of Michigan Foundations (CMF) to talk about their interest in starting a small family (private) foundation.
Explore CMF’s tools and resources for family foundations.
Another option would be for the family to set up a fund in their local community foundation. There are various advantages and disadvantages in the tax deductibility for the gifts, the amount of administrative work for the family, and the degree of power the family has over the grants to be made from their funds. From time to time, issues arose regarding how a family was helped by CMF when they decided to establish a private, family foundation instead of placing a fund within the local community foundation.
Why didn’t CMF steer the donor to putting their money into the community foundation? Do communities really want a lot of small family foundations? The deciding factor for CMF in their behavior and technical assistance went back to the premise that all giving is good – and that the donor should decide what they want to do. CMF’s role was to provide good information on the advantages and disadvantages of all of the options, and then let the donor family choose the route they want to pursue.
In the family foundation programming, very wealthy families sit in conversation about their family giving with families of more modest means. In the corporate giving workshops, large multinational corporate foundation staff members work on committees with small business managers. This diversity in scale adds vitality to the philanthropic community in Michigan.
Video: Watch leaders discuss family and corporate foundations.
The Dorothy A. Johnson Center for Philanthropy (Johnson Center) at Grand Valley State University in Grand Rapids, Mich. is one of the largest of the formal university-based academic centers on philanthropy in the nation. Started in 1992 with a challenge grant from the W.K. Kellogg Foundation that was matched by funds from Grand Valley, the Johnson Center was named for Dorothy A. Johnson, founding executive director of the Council of Michigan Foundations in recognition for her service to the state of Michigan and philanthropy upon her retirement from the Council of Michigan Foundations (CMF) in 1999.
Throughout the history of the Johnson Center, a suite of services has developed that address undergraduate and graduate level education; professional development services for grantmakers and grantseekers; and direct research services to support the work of foundations and nonprofit organizations.
Video: Watch leaders discuss the Johnson Center.
The Johnson Center’s Nonprofit Services program (named the Nonprofit Leadership Institute at the time) was renamed for The Herbert H. and Grace A. Dow Foundation in 2009. The Herbert H. and Grace A. Dow Foundation Nonprofit Services (Nonprofit Services) provides ongoing workshops, seminars, and technical assistance for nonprofit organizations, their board members, and staff. While large nonprofits, such as hospital systems or colleges, have the financial capability to hire specific expertise, the smaller and grassroots nonprofits often have few resources to commit to the development of their people or organizations. Through Nonprofit Services, in collaboration with the Michigan Nonprofit Association, the professional development needs of smaller nonprofits are met.
Through their commitment to smaller nonprofits, the Johnson Center exemplifies the thesis that all philanthropy is important. By serving all nonprofits without regard to their service area or focus, the Johnson Center also models support for the philanthropic sector and not just one segment of the sector.
Launched in 2004 by Dr. Joel J. Orosz, former program director of Philanthropy and Volunteerism at the W.K. Kellogg Foundation, The Grantmaking School (TGS) focuses its work, nationally and internationally, on the professional development needs of grantmakers. Often grantmakers begin their foundation careers as experts in their area of interest – housing, children, the environment, the arts, etc. Rarely do grantmakers have expertise or experience in the skills and techniques of grantmaking.
The Grantmaking School serves all sizes and types of grantmaking foundations – large and small, with staff or with only volunteer trustees, and with grantmaking interests in local communities or around the globe. Bringing this diverse audience of grantmakers together strengthens the perspectives of the professionals on the art and professional behavior of those holding the grantmaking trust.
The services for grantmakers offered by the Johnson Center are not determined by the size, type of grantmaker, or the grantmaker’s mission. All philanthropy is valued and supported.
Video: Watch Joel Orosz discuss The Grantmaking School.
Grantmaking foundations formed and still influenced by family members as trustees differ in scale from the Bill and Melinda Gates Foundation to modest family donor-advised funds in local community foundations, which may be as small as several thousand dollars. The common thread between these organizations is the presence and influence of the donor family on the work of the foundation.
The Johnson Center is home to the first endowed chair in family philanthropy. The chair was funded by a Grand Rapids, Mich.-based family foundation, The Frey Foundation. The work of the Frey Chair lies both in furthering knowledge about family philanthropy and in providing technical assistance to family foundations. All family foundations are eligible both for study and for service from the Frey Chair.
The services of the Frey Chair are not limited to just large family foundations, or by the service area or mission of the family foundation. All foundations are valued.
With the leadership of the Grand Rapids Community Foundation, in 2000 the Johnson Center developed a community research and data mapping entity called the Community Research Institute (CRI). Supported by other Grand Rapids foundations, CRI continues to operate from a belief that reliable information supports democratic decision-making. The role of CRI is often described as “democratizing the data.” CRI data and the mapping capacity for this data allow any foundation, donor, or nonprofit organization to have access to the same level of sophisticated information usually retained by larger organizations.
The Council of Michigan Foundations and the Michigan Nonprofit Association use this community research expertise in working with their members and in the development of public policy initiatives for the charitable field.
CRI makes information available to all nonprofit organizations and foundations online for free. There is no distinction made related to the size of the nonprofit or foundation, service area, or mission. All information has been “democratized” and is openly available to anyone who seeks it.
Video: Watch leaders discuss the Community Research Institute.
In 2007, the ConnectMichigan Alliance and the Michigan Nonprofit Association (MNA) merged under the organizational umbrella of MNA. MNA had experience in such mergers because of its earlier affiliation negotiations with Michigan Campus Compact and Volunteer Centers of Michigan. The Michigan culture of respect and pragmatic leadership allowed for combinations of initiatives that make logical sense and that take into account environmental changes of the times.
MNA does not limit its membership only to large nonprofits, statewide nonprofits, or based on the region served or the nonprofit’s mission. All of Michigan’s nonprofit organizations are welcome to be members of MNA. In addition, MNA has extended its reach to provide a home for formerly independent nonprofits that required additional organizational support and were focused on a statewide mission to strengthen an aspect of philanthropy. All forms of nonprofits and philanthropy are served by MNA.
Historical Document: Read about the merger of the Michigan Nonprofit Association and ConnectMichigan Alliance.
Campus Compact, a part of the national Campus Compact network, is a program that supports student volunteerism in Michigan colleges and universities. Brought to Michigan through the initiative of John Marshall, then CEO of the Kresge Foundation, Campus Compact serves all colleges and universities throughout Michigan. Size of school, private, public, or corporate organizational form, geographic location, or type of student body has no bearing on membership. Each college or university involved provides another pathway for college-age students to participate in their communities as volunteers and to learn related leadership skills.
All institutions of higher learning can be members of Campus Compact – community colleges, independent colleges, religiously affiliated colleges, professional schools, public and private universities. Michigan Campus Compact supports all sizes and forms of institutions that are interested in the goal of college-level volunteering.
Video: Watch leaders discuss Michigan Campus Compact.
Inspired by the leadership of former Michigan Governor George Romney, the Volunteer Centers of Michigan provide community-level support for volunteer activities. Launched as a free-standing organization, it merged with the Michigan Nonprofit Association in 2000. Volunteer Centers of Michigan has offices serving all sizes of communities, in every geographic setting that has requested and supported such a service, and without regard to the demographics or characteristics of the community being served.
Volunteer centers in Michigan do not discriminate as to the types of organizations that can use their services. Volunteers who are recruited, trained, and celebrated might work in nonprofit organizations with advocacy missions that are diametrically opposed to one another. The cause belongs to the wishes of the volunteer. The volunteer centers exist to make sure that volunteers are recruited, supported, and prepared to follow their passions.
Volunteer Centers of Michigan invite all communities and municipalities (townships, villages, cities, counties), and nonprofit organizations (United Way, community foundations, independent nonprofits) who want to support community-level volunteering to be members of VCM. The Volunteer Centers of Michigan do not specialize in the type of volunteering, the age of volunteers, or their interests. The goal is to support all volunteers in any community in Michigan.
Video: Watch leaders discuss the Volunteer Centers of Michigan.
Advocates for youth empowerment and service, Michigan was one of the first states in the nation to set up their statewide community service commission – the Michigan Community Service Commission (MCSC).
The impetus to do so can be traced to a meeting convened in Albion in 1993 by statewide grantees of the W.K. Kellogg Foundation’s Philanthropy and Volunteerism programming area, then led by Joel J. Orosz. Appointed by the governor and typically (by precedent, not by charter) chaired by the spouse of the incumbent governor, MCSC is a public-private partnership serving as the steward and conduit of federal funds for service, such as service-learning or AmeriCorps., VISTA, and Senior Corps.
The Michigan Community Service Commission invites all communities and organizations, within the guidelines of the federal funding provided, to become grant recipients and participants in the MCSC programming. There are no focused programs – all work to provide general support to the field of philanthropy through the specific strands of national service (such as AmeriCorps). AmeriCorps workers are in small towns, and large cities. They work in schools, in government, and in nonprofits. They work on a wide variety of issues in a multitude of ways. The key is that the MCSC-funded streams of service are broadly available and support all forms of philanthropy.
In distributing service-learning funds to schools, the Michigan Community Service Commission (MCSC) does not discriminate based on school size, geographic service area, number of students engaged, or any other demographic criterion. The purpose is to advance service-learning as a teaching methodology across the state of Michigan. This same philosophy of inclusion and honoring all forms and sizes of volunteering is implemented in the AmeriCorps and VISTA.
Service-learning happens in a variety of schools – public, independent, religious, and charter schools. MCSC provides support for service-learning without regard to the type of school, the size or type of community, or the areas of focus of the student volunteers. All philanthropy is supported.
Video: Watch leaders discuss the development of the Michigan Community Service Commission.
Among the foundation members of the Council of Michigan Foundations (CMF), there was a natural tension between the interests of the community foundation members and the creation of family foundations. Community foundations are required by the tax code to raise additional private donations each year. They also desire donor-advised funds as components of their endowments, growing their size and organizational sophistication.
Family donors, on the other hand, often desire control over the giving of the grants from their funds and the dimensions of family cohesion that can arise from having a family foundation. For the family desiring to form a foundation, there are distinct advantages and disadvantages to the legal form their giving might take. Early on, the CMF community foundation members often lobbied CMF to do more to encourage families who came to them for advice to opt for the donor fund alternative.
CMF was steadfast in responding that the donor/philanthropist is the “client.” Impartial information would be given to donor families so they could make an informed choice. Sometimes, all objective criteria would point to a conclusion that a donor families’ gift was really very small for forming a family foundation, but the family still preferred to choose that option. Some community foundations were not happy with CMF’s position, pointing out that a donor-advised fund, objectively, would make more economic sense for the family. The principle upheld throughout was that the gift would be valued and the donor’s wishes respected, without regard to the size of the gift.
As families gained more experience in their giving, many eventually chose to transfer their family foundation into a donor-advised fund at their community foundation. By honoring each family’s goals and feelings, philanthropy in the state was enhanced.
Perhaps the most difficult area for the Council of Michigan Foundations (CMF) was the problem of community identity. Often based on individual experience and worldviews, community leaders regularly defined “community” in differing geographic scale. For some, a large metropolitan region was their community. For others, a suburb or an enclave within a city or a township represented their idea of “community.”
The goal to cover the state of Michigan with community foundation service raised these geographic issues to the forefront. The Michigan Community Foundation Tax Credit, the W.K. Kellogg Foundation’s challenge grants, and the Charles Stewart Mott Foundation’s technical assistance grants attracted interest from communities of many sizes.
Throughout the various community-based tensions, CMF responded based on the principle that the “community” leaders and donors were the ones who would define the geographic scale of the community foundation. As with family philanthropy, sometimes a small community would start their own community foundation. Then, as they gained confidence and knowledge, they would realize their community might be better served by becoming a component fund of a larger neighboring community foundation or regionally-defined community. This was a process that occurred over time.
In other cases, the smaller community foundations have remained independent. Because of the local pride and commitment of major gifts from community members, they have grown to extraordinary scale, providing critical community leadership in smaller communities.
Still, some small community foundations have struggled. CMF continues to assist these smaller communities, providing technical assistance and nurturing their local philanthropic interests and leadership. In most cases, arrangements have been made that balance community pride and identity with economic and organizational scale through partnerships and other legal agreements.
Deciding who should be served, who is “in” or “out,” and who is “effective” or “ineffective” is often judged by metrics such as asset size, number of staff, size of gift, size and number of grants, or population of community. Acting on a principle and then following through, even when that action is uncomfortable or politically difficult, is the more challenging approach. In the case of the philanthropic leaders in Michigan, they have consistently valued and upheld this principle: philanthropy (giving, serving, and advocacy) is good, no matter its size, organizational form, type, or focus.