Episode 20 – An Effortless Way to Donate

Lisa Graham (00:00):
Welcome back to another episode of Change The Rules. I’m Lisa Graham. And with me today is Dan Graham. Together, we are the founders of Notley. And one of the things we get most excited about at Notley are the partnerships that we have and what helps us to generate the greatest impact. And one of our favorite organizations to collaborate with is the Austin Community Foundation. And so this week we are chatting with Mike Nellis, who is the President and CEO of the Austin Community Foundation. One of our favorite people. I’m going to start out with what I hope is a super easy question. And it’s actually one of the top questions I get about the Austin Community Foundation. What is a community foundation?
Mike Nellis (00:41):
Oh, it’s a great question. And one that I struggled to answer actually for a very long time. And the reason is because we do so many things for so many different people. And certainly if you’ve been in Austin and work in the non-profit or philanthropic communities, you’ve had some kind of intersection with the community foundation. And so what I’ve always said to other folks is once you’ve seen one community foundation, you’ve actually seen one community foundation because they’re there to really reflect what is unique about their community. The sort of lifecycle their community is in and serving the needs of that community. So, what we do at the foundation is really three things. So we inform by using data. We invite by sort of bringing community stakeholders around the table to talk about that data and identifying some of the biggest issues in central Texas. And then we work with our partners to invest in promising solutions. And so that really sort of encapsulates what the community foundation is about and what we’re trying to accomplish. We represent roughly 1300 philanthropists in central Texas. And so we’re the third largest foundation here in the region.
Lisa Graham (02:05):
And a follow-up to that, which is another question Dan and I get asked a lot. What is a donor-advised fund?
Mike Nellis (02:11):
Oh my gosh. So and so notice, I sort of talk about the foundation without using the word donor-advised fund, right?
Lisa Graham (02:20):
You did. And maybe this will help us as well, right? What is the community foundation? Well, you know, with the community foundation, this is what I would say. I say, you can open up a donor-advised fund and they will help to inform you on the best way for you to channel your donations. And so, but then they ask, well, how is that different from a foundation? Why should I do that instead of just starting a foundation? So can you answer what is a donor-advised fund?
Mike Nellis (02:43):
So, a donor-advised fund is a really flexible giving tool and really when you boil it down, what it allows you to do is to give now and to realize that tax deduction today, but then use that capital over a long period of time. You can donate in to the fund lots of types of assets from cash to stock to closely-held stock to limited partnerships. So anything that can be really monetized, you can donate into this fund. So it’s a really flexible tool and it’s an alternative to a private foundation. The great things about it are, one, it’s more flexible than a private foundation. Two, it’s less expensive to run than a private foundation. So we sort of do all the work and you get to do the fun part of philanthropy. And then, I would say the third thing is that you get a better tax deduction by working with the Austin Community Foundation than you would opening up your own private foundation.
Lisa Graham (03:47):
Why?
Mike Nellis (03:47):
So, we’re a public charity, so different part of the tax code than a private foundation. And so we provide you with a 60% adjusted gross income deduction versus a 30% adjusted gross income tax deduction on a private foundation. I can be like tax nerd all day long, but the idea is that it’s a better tool to achieve a philanthropic outcome than a private foundation is.
Dan Graham (04:14):
I think a private foundation also forces you to give away like 5% of your assets every year, even if you don’t have the right fit for that money, whereas a donor-advised fund does not.
Mike Nellis (04:23):
Right. There’s no requirement to deploy capital at all. So you can generate a return on that wealth for years and years and years if you’re inclined to do so.
Lisa Graham (04:34):
And is there a cap to the size of a donor-advised fund?
Mike Nellis (04:37):
Nope. Part of what we try to do is really democratize philanthropy in a sense. And so we’ve got funds that are very, very small from $2,500 to $5,000. All the way up to $27-28 million donor-advised funds. And what we’re seeing, Lisa, is a lot of conversions from private foundations. There’s a point where people kind of go, I’ve got a $10 million foundation or a $5 million foundation, and it’s just kind of a pain to run it. And so lots of folks will convert their private foundations to donor-advised funds.
Lisa Graham (05:11):
Yeah. And you had mentioned different assets can be put into these donor-advised funds. And one of the things, I think if anybody out there notices, when you visit the Austin Community Foundation website and you look and see who their staff is, you all have a Park Ranger on staff. Why do you guys have a Park Ranger on staff?
Mike Nellis (05:29):
Yeah, we do have a Park Ranger on staff. So it’s a great story. About 20 years ago, a woman named Georgia Lucas, she passed away, and in her will, she left about 200 acres of some of the most incredibly beautiful property in central Austin to the community foundation. And there were specific requirements about it. And one of those was that there were to be guided hikes and it was to be generally open to the public. And so, we’re here to provide guided hikes if people are inclined to want to do that. But the idea is that it’s a place where you can ensure that your wishes are fulfilled long after you pass away, right? And so we just happen to be the stewards of 200 acres of the most beautiful and probably valuable property in central Austin. It is beautiful.
Dan Graham (06:27):
I think that kind of goes back to the, you know, if you’ve seen one foundation, you’ve seen one foundation. So part of what ACF is guided nature hikes. And I think in San Antonio, they own a movie theater.
Mike Nellis (06:37):
They own a movie theater complex, right. And so somebody donated that. And really what they did was they said, we’re going to donate it, but we want you to continue to operate it. And so they operate it and it provides incredible capital to the San Antonio community. So if there’s anybody in Austin that wants to donate an operating business, we’re here to take it.
Dan Graham (06:56):
I mean, it’s a $600 million movie theater business. So, you know, if you have one of those.
Lisa Graham (07:02):
And so can you talk too about some of the funds you all offer through the community foundation? I know that there are different focuses that you all offer. And so in terms of finding groups for people to donate to, but also just informing the community. I feel like you guys are a place where people can come and say, okay, what are you all doing for women’s issues or different things like that? Can you talk a bit about those?
Mike Nellis (07:33):
So, everything that we do is really rooted in data. And when we talk about data, we talk about sort of the needs of the community. And so we’ve established a partnership with the RGK Center at the LBJ School. And they produce a data set, it’s about 80 indicators that they measure, and it’s generally this sort of health of our community. So things like transportation and housing costs, social equity, the environment, and the idea is that it’s a longitudinal measure of how we’re doing, right? We’re pushing all this philanthropic capital into our community. Is it doing anything? How effective are we? And so we use that data to identify what we believe are the biggest needs in central Texas. And then we provide reports to the community and distribute that information. So the way that we do that is through the two funds that we have right now.
Mike Nellis (08:29):
One is the Women’s Fund of Central Texas, and the other is the Hispanic Impact Fund. And they’re two kind of giving circle concepts. And the idea is that your gift of $500 gets joined with lots of other gifts of $500 and up. And you can have a bigger impact on a certain section of the community that you want to impact. And so we use data to inform sort of how we are deploying that capital, year over year. And we give away anywhere from $200,000-$500,000 annually within those programs. But the other thing that we do is, which is really interesting is this idea of sort of cobbling together capital from our community of 1300 fund holders, right? And so, nonprofits will apply to the foundation and our staff will scrub those proposals and do some basic due diligence on them.
Mike Nellis (09:33):
And then our fund holders will say, ‘Hey, I’m really interested in learning about the environment or education’ or whatever the issue area is, and we’ll pass those proposals onto those fund holders on a quarterly basis. And so our favorite grants are when a fund holder says, ‘I want to learn more about education.’ And we say, great, here’s an interesting proposal for you. And they say, ‘I’m going to put in $10,000.’ And then another fund holder says, ‘I’m going to put in $50,000.’ And then the community foundation puts in its own capital and fleshes out kind of a fully funded grant that we can put out into the world. And so we feel like that ability to sort of aggregate capital is one of the benefits that we can provide to not only the nonprofit community but also to our funders
Dan Graham (10:20):
One of the interesting things that I think is so unique to the community foundation model is you mentioned kind of these gifts that you get, or these endowments that you get, and the restrictions that are put on them, or the guidelines that are put on how the money should be given away or used. You know, I think that the general conception is that there’s a limited amount of funds and a lot of people are applying for grants to get access to those funds. But with all these restrictions, are there instances where you have more funds in a particular area to give away, than you have grants?
Mike Nellis (10:56):
Yeah. So, we have about $250 million in assets at the foundation, which is great. We’re growing really significantly right now. The amount of money that the community foundation itself has actual discretionary control over is about $2 million every year. So it’s a very small amount of money. And within that $2 million, we have money for animals that people that put restrictions on. There is an incredible fund that a man named Nelson Pewitt gave us a significant amount of capital, after he passed away, because football was so important in his life. So we have all of this youth football money. And so yes, we have lots of animal money. We have youth football money. But what we don’t have is a ton of education money, frankly, because, or I should say we don’t have ton of unrestricted education money to put in play. So really we’re sort of providing a service to the philanthropic community to ensure that their wishes are met long after they’re gone. But, also, we’re raising capital every single day to make sure that the needs of Austin as it exists today and tomorrow are being met.
Dan Graham (12:14):
So if you’re being denied a grant at the community foundation, maybe add some puppies or some high school football?
Mike Nellis (12:21):
Puppies or football works great all the time. For most funders, not just ACF funders, right? And it’s, I have just, what I think is the greatest gig in Austin. I love being part of the foundation and I’m so fortunate that I get to be the CEO. I unfortunately have to say “no” so much more than I get to say “yes”. And because of the nature of what we do, we tell folks that sort of cultivating us as typical sort of funders is not necessarily a great use of time because from one year to another, you may get funded one year and you may not get funded the next year. And so there’s not necessarily a great rhyme or reason to why funding decisions are made from our fund holders. From the board and from the community foundations capital, there’s definitely a way in which we approach that. And we say that we’re focusing our capital through grant making, through our programs, the Hispanic Impact Fund and the Women’s Fund, and through impact investing to kind of narrow the opportunity gap in the five county region.
Lisa Graham (13:32):
And with some of this more specific funding, how do people get access to that? How do they know that those opportunities are out there?
Mike Nellis (13:41):
So we do a sort of a call for proposals once a year for Women’s Fund and once a year for Hispanic Impact Fund, which is brand new, and people can apply.
Lisa Graham (13:51):
I was thinking more specific like this animal fund or like this football fund. I’m sure there’s a lot of those out there.
Mike Nellis (13:56):
It’s just a general proposal to the community foundation. And so tell us your mission, tell us why this is a need, tell a good story, and then what we’re here to do is to try to match that up with the resources that we have.
Dan Graham (14:12):
I think what I’m really curious to hear a little bit about is, I know historically the community foundation gives out grants. It provides a place for donor-advised fund holders to utilize their capital. But in terms of internally generated projects or programs, things that you and your team are really pushing forward in the space of kind of social innovation, what are a couple of the things that you’re working on? Or that you’ve got in the works that you’re really excited about right now?
Mike Nellis (14:42):
So there are two pieces that we’re really excited about. First, is this idea of trying to sort of democratize what we call impact investing. And impact investing, it’s like this giant Uber-like umbrella term and it can mean a lot of things to a lot of people. For us, it means providing low cost recycled capital to nonprofits that can access it. And so what we’ve done is we’ve essentially created a basket of funds, something that kind of looks like a mutual fund or an index fund for the local community. And it’s called The Opportunity Fund. And the idea is that we have already invested about three quarters of a million dollars into this fund. And we’ve done transactions with Grameen with, a group called Business and Community Lending of Texas, with People Fund, and a few others.
Mike Nellis (15:42):
And so we’ve lent them capital. And now we’re opening it up to the rest of our fund holder base to actually come in and provide PRI’s (program-related investments), essentially lending to these institutions through this Opportunity Fund. So, for example, with Grameen, you couldn’t go into Grameen unless you have $250,000-$500,000 to capitalize them. With The Opportunity Fund, you can actually come in with a minimum investment of $2,000, and you only have a two year lockup on that capital. And then you get a roughly 2% return on that money. So the idea is to use different tools and different ways to solve problems in central Texas. So this is our effort to sort of democratize impact investing, but then you also have a grantmaking lever that you can pull and then programming.
Lisa Graham (16:41):
Is something like The Opportunity Fund common across community foundations, or is this a pretty new concept?
Mike Nellis (16:46):
It’s a pretty new concept. And, you know, community foundations have this interesting opportunity right now as impact investing is becoming more accessible, to make it more accessible to much of central Texas. I think you guys have done such a great job of championing that work that people really want to start thinking more about how to recycle their capital over and over and over to create impact in central Texas. And so the way that we think about it is there’s a right time and a right place to do that for a community foundation. So most community foundations are a little bit more traditional in the way that they think about investing their capital. And we just happen to be wanting to take a couple of steps ahead of where we have been, really in order to reflect what our community looks like and what our donors interests are and how they want to deploy capital.
Dan Graham (17:50):
That’s awesome. You said there were two things you were excited about.
Mike Nellis (17:52):
The other thing is a new tool that we’ve put together and it’s called Modern Giving. And it’s a digital platform that allows you to essentially do micro giving into a donor-advised platform. So, most donor-advised funds have a minimum of a $5,000 gift, right? And into the fund. So that essentially weeds out a whole group of potential philanthropists in the community. And so what we’ve done is, we’ve said we actually want to lower the bar to zero. So you can use this Modern Giving tool to donate into this fund. And you can donate in $5, $10, and you can transact online in real time. But the idea is you aggregate capital in small increments over time. So if you want to do payroll deduction into your community foundation Modern Giving account, you can do that. And then at the end of the year, if you have a thousand dollars, you can make a contribution for a thousand dollars to any organization that you want to. So there are a lot of platforms that are sort of similar giving types of platforms, but they’re really just pass-throughs. What we’re doing is creating the opportunity to aggregate that capital over time. So you can essentially create a savings account for your philanthropy.
Dan Graham (19:19):
We used this app during Philanthropitch this year and it was awesome. And I heard a lot of people kind of describing it as it’s like Venmo for giving.
Mike Nellis (19:29):
It kind of is. Yeah. It’s like Venmo for giving.
Dan Graham (19:32):
Which, you know, I’m really excited about, but I feel like I’m going to be giving a lot more now that it’s so easy.
Mike Nellis (19:40):
And we will accept every dollar you want to give. I mean, it’s a really easy, flexible tool. And the fact that you can do payroll deduction with it. And you can transact all day long. You never have to talk to a person. You can do everything on your mobile phone. That’s it, there’s nothing else to it.
Dan Graham (19:59):
That’s right. Mike and the team at ACF do all that paperwork.
Mike Nellis (20:01):
We do all that stuff for you. We love paperwork. But we are here if you want to talk to us, so yeah.
Lisa Graham (20:11):
You were saying there are these new ways of giving that are becoming a little bit more mainstream that you guys are adopting, but how have you seen the philanthropic landscape of Austin change? I mean, ACF has been around for decades and I’m sure a lot, clearly Austin has changed a lot in that time. And so how have you seen what people give to? How people give? Have you seen a lot of trends change or trends come and go over that time? I know you haven’t been there for 42 years.
Mike Nellis (20:48):
I’ve been in Austin for 18 [years] and working in the nonprofit sector the whole time. So I have at least a little bit of visibility there.
Dan Graham (21:05):
You know, I get that joke a decent amount. Or I used to. Yeah, not anymore.
Mike Nellis (21:18):
The way that we see philanthropy is that these different tools are a kind of a means to an end. And so, where I think the idea of giving has typically been viewed as grant-making, especially here in central Texas. On the coasts and sort of through larger foundations, the PRI, MRI, sort of concepts have been around for 20 plus years and they’ve been doing them, but in Austin it’s a relatively new effort. And so our infrastructure isn’t fleshed out, I think fully to be able to make it as effective as it potentially could be. And frankly, I think nonprofits, there are a handful of them that are thinking about it and have accepted debt and have taken on that kind of venture philanthropy. And I think that we’ll start to see more and more and more of that. But I also feel like for a large chunk of nonprofits, right, it may not be the right tool for them.
Mike Nellis (22:34):
And they may not be, even if it is the right tool, they may not be in a lifecycle where they feel like they can take on debt. Their board may not be ready for it, right? And most boards feel like debt is like a dirty word. Let’s not talk about that ever. We don’t want to take on debt. But for groups like College Forward, that is an exciting way to sort of accelerate growth and to really have a bigger impact than they could through philanthropy. So I think it’s more about, is it the right tool at the right time for the right mission. Than it is about, well, you know, all the cool kids are doing it, so we got to get in on that, right? And so I think for nonprofit CEOs, it’s about being thoughtful about the assets that your organization has.
Mike Nellis (23:22):
Can they be monetized? Can you create an earned income model? Is it right for your organization or are you going to jump off the cliff and go, ‘Ooh, I don’t really have a parachute here. I’m in trouble.’ And I think generationally too, what we’re going to start to see is, as a younger generation of philanthropists come in, they’re going to drive that market a little bit more, right? And so when we talked to some of our veteran fund holders, they kind of look at impact investing and go, ‘let’s just give it’, right? And that’s great. We’re happy to help them do that. But what we do see is from a younger sort of fund holder audience, they want to use their capital in a different way than they have.
Lisa Graham (24:06):
That was going to be my follow-up, have you seen the demographics change?
Mike Nellis (24:10):
Sure. A hundred percent. What we see a lot of is that demographic starting to say, ‘Huh, I’ve heard about this. How can I be involved in impact investing?’ Yeah.
Lisa Graham (24:25):
So, you’ve been involved in the Austin community for 18 years. What attracted you to the community foundation? How did you come to this? How did you come to where you are?
Mike Nellis (24:36):
How did I come to where I am? So, I mean, it’s such a great gig. And if you’ve worked on the sort of non-profit side of the equation, and we are, I mean, the community foundation is a nonprofit. But when you’ve been on the other side of the equation, you look, and you go, man, how awesome would that be to give away money all the time? And it would be incredible. And so I’d seen the incredible and quiet and humbled work that the community foundation has done. So we’ve been part of some of the most important projects in central Texas, but we’ve been really, really quiet about it. And when we sort of affectionately say that we’re the plumbing of philanthropy, right? And the idea is that if you want something to happen, the Austin Community Foundation can help make that happen in central Texas.
Mike Nellis (25:26):
And so I wanted to be a part of that. And I’d been at the Thinkery for 11 years and was so proud of the work that we had done there and was lucky to be a part of it. And felt like there was somebody who’s going to be smarter than me who could take it to the next level. And when I got the call to come to the foundation, it was just, yeah, why wouldn’t I want to be a part of that? I think I was a fairly non-traditional sort of choice, right, as CEO. They chose somebody from the nonprofit sector. They chose someone who was relatively young. And so it was a bit of a risk for that. And so, yeah, I think that what the board was sort of seeking was again, to reflect the change in our community, right?
Dan Graham (26:16):
I think you’re being maybe a little discrete, or maybe a little modest there. You know, you kind of alluded to it, but the community foundation has been around a long time and the brand had been, before you kind of coming on board, had been lagging a bit, I think. And it had been a little quiet. And so coming in, that must’ve been a little bit of a hard start. To come in and I don’t want to say that it was a complete turnaround, but certainly there was a lot of effort that you had to put in and the team had to put in. You’ve really reshaped the brand of the community foundation since coming on board. And that’s not something that just sort of happens on its own. I mean, that takes real effort and real focus and real hard work from a lot of people.
Mike Nellis (27:01):
Well, it’s kind of you to say. And I’ve got an incredible board that has placed a tremendous amount of faith and trust in the staff. I’ve got a great group of colleagues that I get to work with day in and day out. And people who really have said let’s dream about what the community foundation could be, right? And should be for our community. And let’s start pushing hard into that space. And so, I think sometimes my colleagues say like, stop with the, “I have an idea”, comment. Like, yeah, we know you have a lot of ideas. But I think that idea of an aggressive pace at the foundation is one that is now really part of our culture. We want to keep pushing and pushing and pushing. And we will make mistakes and we will stub our toe along the way. And we will learn from that. And we will course correct. But we’re going to keep working really, really hard to meet the needs of not only the philanthropic community here, but also the people in central Texas who need us most, who don’t have a voice, and who have been marginalized.
Lisa Graham (28:09):
And to that, how do you see the needs in the nonprofit community shifting in Austin with all the growth that we’re seeing? What are you guys seeing now? And what do you see potentially happening in the next five years? Whereas a lot of the need for philanthropic dollars?
Mike Nellis (28:23):
Yeah. So, I mean, Austin is an interesting place right now. We’re the 11th largest Metro in the country. We are, I think the second fastest growing Metro, maybe second to Denver that might be. And that’s all happened so quickly for us. And for those of us that haven’t been here all that long, we’re kind of like, what are you talking about? But for folks that have been here for a long time, they feel that a lot. And so it’s becoming more of a regional play than it is a local play. And so I think nonprofits are starting to think a lot more about how to serve the entire central Texas region. More of an MSA play. And lots of our nonprofits are located in Austin. They’re located in downtown Austin. And that traditionally has been their kind of catchment area, for lack of a better term. And so I think as a community, as a whole, we need to start thinking regionally about issues.
Mike Nellis (29:21):
We are definitely on a fast track to become Silicon Valley from housing to transportation to affordable childcare. And we have an opportunity to sort of get off of that. We need to find the off-ramp together to figure out how to make sure that we don’t suffer in the same way that some of the folks in Silicon Valley do, right? Austin’s a great place. It’s a unique place. And we have an opportunity to learn lessons from others on what to do and what not to do.
Lisa Graham (30:01):
Absolutely. Well, thanks so much for joining us, Mike. This has been really fun.
Mike Nellis (30:05):
So fun to be with you guys. And thank you so much for what you do for our community every day and the ways in which you push us to do better and be better.
Lisa Graham (30:12):
Well, we couldn’t do it without ACF. Well, thanks so much again for joining us, Mike. Thank you for listening. And if you’d like to check out the work that the Austin Community Foundation does, go to www.austincf.org. The Change The Rules podcast is sponsored by Chez Boom Audio. Chez Boom Audio is the leading audio post-production company for TV, film, advertising, audio books, and podcasts in Austin, Texas. And we’re so honored to work in their studio with the wonderful Shayna Brown. You can find her studio at https://chezboomaudio.com/. And if you want to hear new episodes every week, please subscribe to the Change The Rules podcast on iTunes, and make sure to leave a review.