Solid foundations for business investment in the community
February 01, 2000
The community foundation movement in the UK, although little more than ten years old, now comprises more than 50 local community foundations in various stages of development. Community foundations are charitable trusts set up to benefit a defined geographical area by pooling local financial contributions from individuals, companies, charitable trusts and statutory sources to create a permanent endowed capital fund. ACTAF now has 29 members, all community foundations which have passed the £50,000 endowment mark.
Information from 21 of the members analysed in ACTAF’s 98/99 survey of community foundations suggests that nearly a quarter (23% – more than £2.7 million) of their total income came from companies. With endowment reaching a combined total of £73 million, investment income along with flow-through funds enabled ACTAF’s members to support a grant-making programme of £18.7 million during the same 98/99 period (1) .
Community foundations are specialists in local grant-making and use their well researched knowledge of needs to develop strategic grant-making to often innovative and occasionally ‘risky’ local community projects. It is this knowledge that so often appeals to corporate donors. Whilst it is not usual practice for businesses to invest large sums of money in projects that they have not previously researched, when it comes to their charitable giving unfortunately this is often the case. The ability of community foundation staff and advisers to identify a range of projects from the small scale upwards, addressing areas of real need that are often not ‘visible’ to corporate funders, is valued by businesses which do not have this expertise themselves. Mike Yardley, chief executive of Royal London, emphasises why they work with the Essex Community Foundation. “It is much more effective to co-ordinate our investment in the local community through one route. Thanks to our relationship with the Essex Community Foundation, we have come to understand more about the social needs in our local area.”
ACTAF suggests that £1 million is probably the cut-off point below which it does not make financial sense for either an individual or a company to set up their own charitable trust. The investment income generated from a small endowment is soon absorbed by the costs of administering the trust and the small grants generated from the endowment will make less impact on their own. Likewise for a company with a smaller charitable budget, it does not necessarily make financial sense to employ a community affairs manager. For companies such as these, the donor services offered by a community foundation provide a cost-effective alternative.
The Greater Bristol Community Foundation helps companies manage their charitable giving via a range of donor services that include charitable fund management, cost-effective administration, flexibility and as much or as little control over which projects are supported as the corporate donor requires. Businesses can set up their own funds, tailor made to their own interests – in Bristol corporate fundholders include Hewlett-Packard Bristol, Arthur Andersen, Bristol Port Company and AXA Sun Life. These business have the freedom to indicate the areas of need they wish to focus on, but leave Foundation staff and advisers to identify appropriate projects, manage the grant-making process and report back to the companies.
Companies are all too familiar with being regularly approached by charities, often via unsolicited calls or letters from a wide range of local community groups. Larger companies may have developed a strategy for charitable giving that encompasses small, local charities, but this is not always the case, and is rarely so for SMEs. By handing responsibility for corporate giving to a local community foundation, companies can confidently refer all appeals to them without damaging their reputation in the local community.
AXA Sun Life is one of Bristol’s biggest and most successful employers, with more than 3,000 staff at its headquarters in Stoke Gifford and other offices in the city centre. The company takes its corporate obligation to support charitable work seriously, but has neither the resources nor the time to pick through the thousands of requests it receives for small amounts of money. Brian Symonds, charitable appeals executive for AXA Sun Life, explains, “companies of our size are more geared up to support national charities raising money for larger capital projects. Having said that, there is a genuine desire to help the local community and to support smaller projects. The Greater Bristol Foundation is an ideal way for us to satisfy this objective. The Foundation is able to look after our fund. They have the resources to research smaller projects, uncover real areas of need and make sure our money is being put to good use. It is our conduit to the community. For a company, it is an excellent way to support the community with a charitable donation without allocating the resources required to manage a charity budget focused on smaller local charities. I would thoroughly recommend it as a fast way to reach deep into the heart of the community.”
Crucially, by giving money to an endowment a company starts to build up a long-term and permanent relationship with the local community. The Cumbria Community Foundation was inaugurated at the end of August 1999, with a cheque for £100,000 from British Nuclear Fuels (BNFL), the first instalment of £1 million that BNFL is donating over the next five years towards the community foundation endowment. The BNFL money will act as a challenge to other businesses to ‘join in’ and help the Community Foundation reach its initial endowment fund target of £3 million within three years. It is the permanence of a community foundation that appeals to many corporate donors. They can be confident that 100 years later their money will still be tackling community needs in the area.
A local company often starts a relationship with a community foundation when it channels flow-through funding through the foundation. As the company’s confidence grows in the community foundation and it sees the effect of the grant-making, a long term relationship develops. This has happened in South East London where the Community Foundation has built up strong links with PricewaterhouseCoopers. Community foundations can often then find themselves in a stronger position to convince their corporate supporters of the importance of contributing to an endowment.
Corporate support is not just limited to funding and many community foundations, such as the Isle of Dogs, have successfully attracted corporate trustees who may live or work locally. Many community foundations provide further networking opportunities by developing corporate membership schemes that are of mutual benefit.
For companies with offices across the UK, a quick call to ACTAF can put them in touch with community foundations in the regions where they have a base. GEFCO, the London based distribution company, has a number of sites in the UK, including Glasgow, Manchester, Sheffield, Coventry and Gloucester. Following initial work with the Heart of England Community Foundation, the company has now donated £10,000 to support local community projects in the areas around their five main sites, £2,000 each to five community foundations.
ACTAF gives advice and help to any company interested in finding out more about working with a community foundation including setting up a named fund, contributing to an endowment, channelling flow-through funding or becoming a trustee or advisor.
Gaynor Humphreys is director of the Association of Community Trusts and Foundations, (ACTAF), 2 Plough Yard, Shoreditch High Street, London EC2A 3LP. Tel: (020) 7422 8611. Fax: (020) 7422 8616. E-mail: actaf@communityfoundations.org.uk
(1) Annual survey of Community Foundations, 1998/99, is available from ACTAF with final results expected shortly.
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