A worthwhile guide created by the Foundation Strategy Group in 2003 that thoroughly explores the challenges, opportunities and strategies for effectively ensuring the long-term sustainability of various types of community foundations. This study focuses on analysing and understanding all the factors that directly or indirectly affect the financial stability of communities and their effectiveness in achieving their goals.
The study was conducted to understand how community foundations can effectively support the financial sustainability of communities while fulfilling their targeted priorities. It is based on an analysis of nine different community foundations that examined their expenditures and revenue structure, major donor preferences, and competitive positions.
The authors provide an in-depth analysis of the operational and financial challenges faced by community foundations and offer practical strategies to strengthen their sustainability and impact. It is therefore a valuable resource for foundation leaders seeking to balance financial realities with their intended mission.
The main findings of this study are:
1. Mismatched resource allocation: A large number of community foundations tend to allocate available resources in ways that often do not fully align with their highest mission priorities or contribute to their long-term sustainability.
2. Cross-subsidisation: This is a tool that operates between different types of foundations, where some products (such as scholarship funds) require more resources than they are able to generate, while others (such as unrestricted funds) are more sustainable.
3. Variability of costs: The costs of managing similar products can vary considerably between funds, indicating good potential for efficiency gains.
4. Donor preferences: donors are often very price sensitive, especially for donor advised funds (DAFs), and expect to receive maximum value in the form of services such as philanthropic advice or improved investment opportunities.
5. Competitive environment: Civic foundations typically face intense competition from commercial foundations and philanthropic consultants, which necessitates a downward revision of service offerings and pricing.
From the above, a number of practical recommendations can be synthesised to improve the sustainability of foundations.
1. Foundations should more actively analyse their internal processes, identify all inefficiencies in order to eliminate them, and regularly learn from each other in order to implement best practices to increase efficiency and reduce core costs.
2. Tailoring products and services to meet the needs and preferences of different types of donors can significantly increase the effectiveness of fundraising.
3. By focusing on products and services that are aligned with the foundations’ mission and financial goals, they can better compete with commercially driven alternatives.
4. Community foundations should continuously explore additional sources of income, such as providing administrative support to small family foundations or offering tiered services, including advisory services.
Key factors for the sustainability of community foundations:
concentration of available assets in fewer products;
limiting customisation and the number of extended services;
achieving efficiency through a greater share of high-volume transactions;
moving to larger average fund sizes;
offering minimum discounts;
and continuously attracting alternative sources of income over and above traditional fees (diversification);