A Big Bet for Change in America’s Heartland

STEPHEN HILL, FOR THE CHRONICLE

The news hit the front page of the Elkhart Truth in August 2012. A wealthy, eccentric native son had left more than $100 million in his will to the local community foundation, asking only that the money go to the betterment of Elkhart County’s 200,000 residents. A few of the good people of Elkhart interpreted that quite literally: They made their way to the foundation’s Main Street office, pushed through the door, and asked for their share.

No checks were cut, of course. But the foundation embraced the notion that the millions bestowed upon it belonged to everyone in the blue-collar community, known as America’s king of recreational-vehicle manufacturing. In the nearly four years since, as the Community Foundation of Elkhart County has adjusted to its new role as a grant-making powerhouse like few in the country, it has stuck to its small-town roots. Resisting the warnings of the large foundations that are now its peers, it has declined to turn grant decisions over to professionals. Community representatives still make the call on most funding, as they’ve done for 27 years. Those vetting the biggest grants include a high-school football coach, a car dealer, and others you might see at Rotary Club.

The stakes are high. The Bridgespan Group, a consultant to nonprofits, ranked the Gundlach gift as the 12th largest “big bet” for social change from 2000 to 2012. The Elkhart foundation is bringing tens of millions of dollars to bear on a small slice of the heartland. Doing that constructively is a tall order for an organization that previously gave away a few thousand dollars at a time for things like new carpet for the preschool. “We have the money to transform a community,” says Phid Wells, a former member of the foundation’s grant-making committee. “And that’s an awesome responsibility. It’s intimidating. It’s scary.”

Ty Wright/Bloomberg/Getty Images

Millionaire and Movie Mogul

Pete McCown, the foundation’s president, had been on the job only a few months when part-time Elkhart resident David Gundlach died of a heart attack. Mr. Gundlach, who had made a fortune in insurance, was this town’s Jay Gatsby. Residents knew little about him, but on visits to his mother in Elkhart, he flew into the municipal airport on a chartered jet and drove around in his Rolls-Royce. In a brief turn as movie mogul, he bankrolled Get Low, a 2009 indie drama starring Bill Murray, Robert Duvall, and Sissy Spacek.

Mr. McCown, a longtime small-college advancement executive and professor, met the town’s celebrity millionaire only once, in July 2011. Mr. Gundlach, who had requested the meeting, said he had included the foundation in his will but offered few details. Mr. McCown assumed it would be years before the foundation saw the money; Mr. Gundlach was 56.

A little more than three months later, David Gundlach was dead. His estate took months to untangle — he had 11 homes, 15 cars, and an extensive art collection — but the foundation eventually collected about $150 million.

Overnight, Elkhart’s community foundation vaulted into the ranks of America’s largest, bigger than counterparts in metropolises such as St. Louis and Miami. In 2020, when the Gundlach gift is fully integrated into its grant making, the foundation will hand out roughly $10 million a year through its community fund. That’s on par with the annual discretionary grant making of the high-flying Silicon Valley Community Foundation. And it’s equal to roughly $50 per person in the county — at least three times the per-capita discretionary grant making of its peers, according to the Foundation Center’s CF Insights.

‘The Golden Chalice’

How to use this money? After the gift was announced, Mr. McCown opened his email daily to hundreds of suggestions from residents. Nonprofits, reeling from the recession, came calling. Some saw the gift as “the golden chalice that’s going to pull us back from the brink,” says Keith Sarber, regional director for the Indiana Nonprofit Resource Network. Others saw a rare chance to dream big.

Pressure to dole out money immediately came even from Mr. McCown’s board members, many of whom served on boards for local charities. Over time, however, they came to see that moving too quickly might fritter away the opportunity to, as Mr. McCown told reporters, “write a different future for Elkhart County.”

Peter Ringenberg, Elkhart County Visitor Center

Over the next year, the foundation conducted more than 80 meetings with county residents. Amish farmers. Hispanic immigrants. The homeless. Captains of industry. Nonprofit leaders.

Two dominant themes emerged. Residents urged the foundation to focus on youth development and building strong families. The community also wanted to enhance Elkhart as place to live and perhaps slow the stream of young people leaving for Chicago and other big cities.

These two themes became the anchors of the foundation’s new grant-making model, introduced in 2014. Significant early grants included $750,000 to help expand Boys and Girls Club facilities and another $750,000 over three years for Partnership for Children, an effort to help at-risk kids involving 12 nonprofits.

In its biggest commitment so far, the foundation pledged $10 million to build a community center in downtown Elkhart. The center will include fitness and therapy facilities as well as a top-flight swimming pool expected to attract up to 100,000 out-of-towners each year for regional and state competitions.

The foundation quietly led the push for the center, partnering with the local hospital system and public schools. Foundation leaders hope it will become a community anchor that helps keep young families in Elkhart. “It’s a bet,” says incoming board chairman Dzung Nguyen. “We think it’s a good bet, but we don’t know. And we won’t know for five or 10 years.”

Chagall Paintings

Though the foundation sold most of Mr. Gundlach’s art collection, it kept some pieces for a future space to honor him. For now, they adorn the organization’s plain offices — pro bono space in a national bank chain’s building. Chagall paintings hang in a cubicle. A Salvador Dali sculpture sits on Mr. McCown’s desk.

More than the décor has changed at the foundation. The five-person staff has grown to 15, in part to handle a rising tide of giving that followed Mr. Gundlach’s bequest. Thanks chiefly to the foundation’s new, higher profile, contributions topped $19 million in 2015, compared to an average of $3 million a year before the gift.

So far, the new hires have been locals, and Mr. McCown has declined to bring in veterans of bigger foundations to oversee matters. “We may need to go there, but senior staff knows what they’re doing,” he says. “They deserve the chance to grow to whatever their professional ability is.”

Jay Seawell/The Elkhart Truth

The grant-making operation has been remade. It used to run very simply: About 20 volunteer community representatives met quarterly and turned thumbs up or down on 20 or 25 proposals. There were no ratings of applications, no site visits, no hard-and-fast rules. Once, the group decided that nonprofits could not apply for a grant twice in a year. “And we stuck to that one until we didn’t stick to it,” committee member Levon Johnson says with a laugh.

To manage the Gundlach gift wisely, the foundation concluded it needed more due diligence and staff support. Application ratings and site visits were introduced, along with principles by which to measure every grant proposal. For example: Does the idea promise transformation in the community? Is there a measurable outcome?

Mr. McCown also dispatched board members to study the work of three dozen mid-size and large foundations. They returned with helpful advice but also this word of caution: Given Elkhart’s new wealth, it had best turn over grant-making decisions to professionals.

‘Money Down a Rat Hole’

At the Cleveland Foundation, which dispenses about $30 million in discretionary grants a year, awards are made exclusively by professionals. “There is an art and a science to grant making, and it’s a lot tougher than people think if you really want to move the needle and have great impact,” says Ronald Richard, the foundation’s head. “It really does need to be professionalized.”

Dozens of community members advise Cleveland’s grant making, Mr. Richard says, but volunteers typically don’t have the expertise to study budgets and evaluate leadership. “I have seen a lot of good-hearted people throw money down a rat hole.”

Elkhart declined to heed the warnings from its new peer set. Mr. McCown worries that professionalization can make a foundation too insular, too clinical, even arrogant. “I want our community to own the community foundation,” he says.

Elkhart is not alone in this view. Volunteers handle grant making at virtually all of the nearly 100 community foundations in Indiana, according to Rosemary Dorsa, vice president of the Indiana Philanthropy Alliance.

“Ultimately, a grant decision is an application of values,” she says. “And somewhere in the process you have to ask: ‘What reflects the community’s values?’ "

If Elkhart had taken grant-making decisions away from the community representatives, Ms. Dorsa says, “the community would have been upset — and I mean really upset.”

Though Elkhart program staff now rule on small grants, requests for $10,000 or more are sent to committees of community representatives established for each of the funding priorities. Another group, called the “key initiatives” committee, handles grant requests of $250,000 or up.

Altogether, nearly 40 citizens of Elkhart County decide how to distribute Mr. Gundlach’s largess, plus a few other dollars. Mr. McCown says they are selected because they are “people of stature” — thoughtful, wise individuals whose decisions will be accepted by the community. Their number includes accountants, artists, the owner of a construction company, and the wife of a Winnebago sales representative. Some defy Middle America stereotypes.

The nine-person “key initiatives” committee, for instance, includes Mr. Nguyen, a Vietnamese immigrant who arrived in the United States in 1975 as a 17-year-old with $20 in his sock. He owns a Buick, GMC, and Hyundai franchise and has plunged into charity work to distinguish himself from the area’s many third- and fourth-generation family car dealers. “I am an outsider,” he says. “Even the guy I bought the dealership from probably said, ‘Oh, he won’t make it. This town doesn’t like foreigners.’ "

Mr. Johnson, who chairs the key initiatives panel, is head football coach at Elkhart Central High, his alma mater, and an administrator in the county schools. His parents were teachers, and he’s an African-American in a county that’s predominantly white. “I’m not one of the good old boys, and I don’t come from new money or old money,” he says.

Overlooking Poverty?

The foundation considers its grant-making model a four-year experiment. At the end of year three, it will bring in the Center for Effective Philanthropy or another outside evaluator to assess its work. “If we need to rebuild it, we will,” Mr. McCown says. “If you don’t think we’re doing it the right way, stay tuned, because it may change.”

Rod Roberson, head of Church Community Services, a social-service agency, believes the foundation has thoughtfully increased rigor and accountability. He also applauds the decision to retain citizen grant makers. “The foundation is us,” he says. “It’s our community.”

But Mr. Roberson says the foundation’s approach has flaws rooted in the community’s attitude toward poverty. Deeply disadvantaged neighborhoods lie just off Main Street, he says, not far from the foundation offices and the future community center. More than half of kids in the county’s public schools are poor enough to qualify for the federal government’s free and reduced-price lunch program. Yet much of Elkhart doesn’t see poverty as an issue, Mr. Roberson says.

He hopes the foundation will rework its funding priorities to focus more on helping the poor. His group and other direct-support agencies typically apply for grants through the foundation’s “quality of life” focus — a third funding stream that the foundation ranks behind youth development, its top priority, and remaking Elkhart as a place to live.

“This is an insular, small community,” Mr. Roberson says. “The foundation is only going to move as fast as the community moves.”

Mr. McCown says the foundation, like Elkhart itself, views charity for the poor with circumspection, worried that it can lead to dependency. In its grant-evaluation form, the foundation says it aims to fund efforts to help the poor with a “hand up,” not a “hand out.” For instance, it does not give grants to help the county’s dozens of food pantries and hot-meal sites buy groceries.

“There are some people whom I respect dearly who think that is just the most insensitive, cold-hearted response from a foundation,” Mr. McCown says. “But quality schools, good parenting, good preschools, good job-training programs, good mentoring program, good afterschool programs — we really believe those are the things that will lead to a lessening of hunger more than more inventory on the shelf.”

This hard-line stance notwithstanding, the foundation’s grants show a surprising abundance of empathy. It has awarded $2.4 million through the “quality of life” stream through which it funds antipoverty efforts. That’s nearly a $1 million more than what it has earmarked to building a more vibrant community, its second-highest priority.

So far, Mr. McCown explains, the foundation has found it difficult to turn away from those in immediate need, even when it should invest in the future. “It’s a hard choice,” he says, “and we are compassionate people.

A Foundation Transformed

David Gundlach’s $150 million gift to the Community Foundation of Elkhart County has turned it into a major force — and a grant maker unusual among its peers.