Calgary foundation splits with community foundation network over position on endowments

Disclosure: Community Foundations of Canada is one of three funders of Future of Good’s fellowship on transforming funding models. However, Gabe Oatley has reported and written this story outside the scope of the fellowship, as a reporter for Future of Good. Future of Good maintains full editorial autonomy and control. For more information, please see our editorial ethics and standards. 

In late June, Calgary Foundation’s board of directors voted to immediately withdraw from Community Foundations of Canada (CFC), the membership organization that represents Canada’s 190-odd community foundations.  

It was a rare move. Communiinty foundations occasionally leave the organization’s network because of a closure or a merger, but very rarely over philosophical differences. 

In an email sent to CFC’s board chairs, and soon after, to community foundations across the country, Calgary’s current and incoming board chair outlined their rationale for the departure. “The reason for this decision is the divergence between CFC’s policies and those of Calgary Foundation related to the role of endowments,” they wrote. “Calgary Foundation’s purpose, reflected in our Articles of Incorporation, is to provide resources to community now and for the future. We are ‘For Community Forever.’

“CFC’s publicly stated position on endowments is significantly misaligned with Calgary Foundation’s purpose and fundamental beliefs.” 

The decision saddened CFC’s staff and board, they said in a follow-up letter to the network’s membership a day later, but it may not have come as a total surprise to the organization. In Calgary’s letter, they said the two organization’s boards had had conversations over the past three years, and that their decision to leave the network was made in the “absence of any change” on CFC’s part. 

Calgary was just one of 190-odd members of Community Foundations Canada. However, Future of Good’s conversations with more than a dozen executives of community and private foundations across the country demonstrate there is a small group of foundations who feel misaligned with key recent policy positions reached by both CFC and Philanthropic Foundations Canada (PFC), the member network for private and public foundations. Additionally, there are some foundations who feel dissatisfied with the approach CFC took to develop their submission to the federal government’s consultation on the disbursement quota.

Moreover, in conversation with Future of Good, community and private foundation leaders raised a more fundamental question. They asked: what is the role of member organizations in this moment? Should PFC and CFC be responsible for championing the perspectives of their members? Or should they be empowered, by the knowledge of their staff and their own board, to form and advocate for their own policy positions? 

It’s not just Calgary

Over the past two years, Indigenous people, Black people, trans people, working class people, disabled people, and many others have called on Canadian philanthropic institutions to change. These calls have been numerous — for more board diversity, for “decolonizing” policies and practices, for requiring foundations to engage in “impact investing.” But one demand has been louder than them all: for the federal government to increase the disbursement quota, the rate at which foundations must give to or spend on charities, and for foundations to voluntarily increase their own granting rate to push more money out, faster, to their communities. 

In the early stages of the pandemic, this advocacy accelerated with the “Give5” initiative which encouraged philanthropic foundations to pledge to voluntarily increase their disbursement to 5 percent — up from the federally-mandated 3.5 percent. (Ultimately, 69 foundations took the pledge.) Conversations on this topic further hastened when, in their 2021 budget, the federal government said they’d host consultations to explore raising the disbursement quota. 

In all, more than 100 individuals and organizations participated in the federal consultations, submitting their advice by email or letter, according to the Canada Revenue Agency. CFC and PFC were two of them. 

In their submission, CFC recommended a “meaningful increase” to the disbursement quota, but did not offer a particular percentage increase, saying that doing so would affirm “the consultation’s primary but flawed question and [uphold] a regulatory system in need of a more fundamental overhaul.” In their submission, they also questioned the primacy of the “perpetual endowment” model in Canadian philanthropy, and encouraged the government to explore opportunities to accelerate the distribution of endowed capital.

“Certainly, [perpetual endowments] can contribute to stability and can be a source of resilience in rocky economic times. However, does the nature of today’s existential threats — like those driven by climate change and the corrosive impact of inequality on social cohesion — mean that we should look at perpetuity head-on?” they asked. 

Among several suggestions, they recommended the government work with provinces and territories to make it easier for foundations to adapt “donor trust agreements” — contracts often used to stipulate how a donor would like their donation to be used in perpetuity. They said this change would provide foundations with more flexibility to use endowed capital to meet current community needs. 

PFC, for their part, called for an increase in the DQ rate to 5 percent. They also called for a regular rate and policy review every five years to account for inflation and foundation investment returns. And a “reasonable transition period” to any new DQ policy of 2-3 years, among other policy recommendations. 

But the positions offered by these organizations didn’t sit well with all members. 

Prior to submitting their recommendation, PFC surveyed their members, finding that about 20 percent of members did not agree with their position. (Alternatively put, about 80 percent did.) Further, in an interview with Future of Good, Jean-Marc Mangin, CEO of PFC, says that two members who left the PFC network this year cited PFC’s policy positions as a contributing factor. Mangin also shared that 10 foundations joined the network, not necessarily because of the DQ position.

Among community foundations too, there was a group of foundations who did not agree with all aspects of CFC’s federal submission. After reading CFC’s submission, nine community foundations co-signed their own, alternative submission, which championed the benefits of perpetual endowments. “The DQ rate must not endanger the sustainability and permanence of endowment funds. That would lead to legal, constitutional, and practical challenges, not to mention the negative impact on the charitable sector in both the shorter and longer term,” they wrote, in their submission.   

The alternative submission’s signatories included large and mid-size community foundations — Winnipeg, Vancouver, Calgary, Edmonton and Hamilton — and smaller western Canadian foundations: Battle River, Lethbridge, St. Albert and South Saskatchewan. In their alternative submission, they called on the government to retain the 3.5 percent DQ for endowment funds and to create a second, higher DQ rate for non-endowment gifts (all other forms of charitable giving.)  

Perpetual endowments and the ‘essence’ of philanthropic organizations

Eva Friesen, President and CEO of the Calgary Foundation says her foundation’s disagreement with CFC on endowments is philosophical. 

She says endowments are part of the “DNA” and the “essence” of community foundations. The first community foundations, established more than 100 years ago, she notes, were based on benefactors’ desire to support their communities forever. Friesen also says the long-term view of community’s needs was and remains one of the differentiating and special things about community foundations. 

Friesen suggests it wasn’t any one thing that was said by CFC representatives that implied a difference of perspectives on endowments, but rather that CFC has repeatedly failed to “state the role and value of an endowment,” in a variety of communications, including the DQ submission. To this end, she says CFC has shown an “absence of leadership on that which is the core of our DNA.”

In an emailed statement, CFC’s leaders, Andrew Chunilall and Andrea Dicks, say their organization is not anti-endowment. “CFC wholly believes in the endowment model,” they write. “Endowments are a critical tool in the community foundation toolkit and an important part of how we have an impact in the community…Because of endowments, we are able to fulfill our purpose in the community, through grantmaking and increasingly through mission related investing.”

They say that after several years of board-to-board engagement with the Calgary Foundation, they believed the boards “had come to a place where we acknowledged that we had more in common than different.” 

Calgary foundation’s decision in June proved otherwise. 

It’s perhaps no surprise however, that communications from CFC questioning perpetuity and encouraging a “meaningful” DQ increase could ruffle some feathers. After all, for many community foundations, it’s through income earned on their endowment investments that they fund much of their granting. Too-high of a DQ increase and they worry they could be forced to watch their assets dwindle over time. 

Friesen, for instance, says Calgary’s endowment (worth over $1 billion in 2021) allows the organization to grant out around $70 million each year without fundraising. She says if they tried to fundraise that same amount each year, they’d be forced to compete for charitable dollars with local United Ways and charities, causing “great harm” to those organizations. 

But several groups, including PFC, have noted that the current 3.5 percent DQ rate leaves room for a federal increase while still allowing foundations to maintain their asset base, or even grow marginally over time. 

In 2021, PFC conducted a study, capturing data from 93 member foundations which found that between 2018 and 2020, the foundations’ average annual gross rate of return was 7.4 percent. The study suggested that with a DQ rate boost to five percent, foundations have a fair likelihood (about a 50 percent chance) of maintaining their asset base. If the DQ rate was boosted further still, the likelihood of maintaining their capital diminishes considerably, the study found, given year-to-year market fluctuations.

CFC’s DQ submission came ‘Out of the blue’: foundation executive

For one foundation executive who spoke with Future of Good, and asked to remain anonymous, it was both CFC’s DQ policy position and the way it was generated that irked him. 

Over the past couple of years, he says he’d noticed increased talk about endowments and perpetuity at CFC conferences and learning events, but says he took it all “with a grain of salt.” CFC’s submission to the federal DQ consultation however, caught him off guard. “It struck many of us as kind of out of the blue and not something that we had certainly been asked about or had participated in putting together,” he says. 

Another community foundation executive director, who also requested to speak anonymously, says she felt like sessions held by CFC leading up to the submission were more “educational” in nature than consultative. She says she really enjoyed and appreciated these sessions, but wishes there had been more opportunities for one-on-one conversations between CFC and her foundation’s board members leading up to CFC’s government submission.  

She says she was also unclear about the purpose of a survey that CFC conducted as part of its DQ consultation. She says she completed it, not realizing that it would shape CFC’s government submission: “It was just one of the one million things on my plate [at the time] and I completed the survey [with] the understanding that it was going to prolong further discussion.” 

A third community foundation executive, who also asked to speak anonymously, says CFC “dropped the ball” on completing a proper member consultation. He compared the process to the one carried out by PFC, which Mangin says was the “most extensive” consultation in PFC’s history. (In PFC’s case, a member-led steering committee conducted focus groups, one-on-one interviews and surveys with members. Mangin says they also consulted experts and conducted research, examining the impact of raising the DQ rate to different amounts.) 

Dicks and Chunilall say, by email, that CFC carried out a consultation with all members before submitting their federal response. They also say that their organization has been in dialogue with members about all of the topics found in the submission for years. 

Sharon Avery, president and CEO of the Toronto Foundation, is sympathetic to the circumstances within which CFC prepared their federal DQ submission, noting the federal consultation “could not have happened at a worse time,” given the pandemic and the foundation’s heavy workload. 

In 2020, Community Foundations of Canada was one of three organizational partners selected to distribute the federal Emergency Community Support Fund, a $350 million program to support charities and non-profits. Through the fund, CFC provided emergency funding to nearly 5,000 projects across the country. 

“I’m sure that CFC will ask themselves the question, ‘Could we have done this differently,’” Avery says, “but I also consider the incredible volume they juggled through the pandemic around government funds.” 

As member-based organizations have increased in power, so too has their advocacy

Just as members are not all aligned on sector policy, so too is there a variety of perspectives on the best way for philanthropic membership organizations to engage in advocacy. Should CFC and PFC directly champion member’s perspectives? Should they have members’ blessing to speak with their own voice, based on their sight-lines across the movement, and the expertise of their staff and board? 

One community foundation executive says he believes CFC has the right to speak with its own voice, as they did with the DQ submission, but that the organization is stronger when it speaks on behalf of the movement: “A policymaker is going to listen a little more closely to [a perspective] that they’ve heard has been developed through a national network with 200 members.” He says CFC was clear in their federal submission they were not speaking on behalf of the broader movement, but says in doing so, they missed an opportunity to have a bigger impact. 

Avery takes a different tack, believing that it’s actually CFC and PFC’s role to “push hard,” within the network and that her job, as the head of a community foundation, is to “ever so slightly temper it so that we don’t leave folks behind who would eventually come with us.” She says board members and wealthy donors need support in learning how to evolve their philanthropic approaches, and that member networks can help lead with this work. 

Avery says, as national organizations, CFC and PFC can also act “as a mirror” for local community foundations. “My belief is that they bring a perspective that is valuable at the local level and that they should have more freedom than they’ve ever had to voice the criticisms.” 

Several foundation executives who spoke with Future of Good noted CFC’s evolution as an organization — from one, focused principally on connecting members — to now one that advocates on key philanthropic sector issues, offers extensive member education, and negotiates large contracts with governments for funds to be distributed through member networks across the country. 

PFC, for its part, has always had an advocacy mandate, says Mangin, but he says that the scope of the issues the organization advocates about have grown. Today, that includes the climate, racism, reconciliation, among other core philanthropic sector issues.

For Avery, this evolution is welcome. She says she believes the times demand a “mandate change” for umbrella organizations, allowing them to be at service to community philanthropy, rather than being “at service to the membership solely.” 

Calgary Foundation’s Friesen agrees with Avery that evolution is healthy, but notes that when change takes organizations in different directions, it’s important to take action. “Organizations evolve,” she says, “and so it’s with greatest respect that we step back. So that the evolution CFC wishes to take under the leadership of their board isn’t impeded by us.” 

Where to from here? 

Friesen says her foundation’s departure from the CFC network “will not change a thing” about their work in the community. “Calgary Foundation was a community foundation long before CFC existed and so we’ll continue being a community foundation in exactly the same way,” she says.  

She says her organization will “respectfully rebrand” their “Vital Signs” community research — a staple CFC initiative, in which foundations undertake research and provide insight into local community challenges — and says they’ll continue to do community engagement and research and share it with local organizations. 

Friesen also says the departure from the network will have no bearing on her foundation’s capacity to partner with other foundations, public or private — that these relationships exist outside the CFC network.  

Dicks and Chunilall say, for their part, that they were disappointed with Calgary’s decision, but that their organization will continue to service all communities from coast to coast to coast through pan-Canadian programs. They also note, by email, that the network continues to grow. In the last year, six new foundations joined CFC. 

Reflecting on Calgary’s decision and the advocacy approaches taken by PFC and CFC on the DQ, sector consultant, MJ Sinha is equanimous: “I read somewhere that you can’t make everyone happy,” he says. “You have to figure out who you are and what you stand for. You have to have the conviction to stick to it. And you have to have the dignity and the confidence to reflect back on what could be done better.” 

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