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By Matthew Ashby, community development specialist, Federal Reserve Bank of St. Louis

This is the third in a series of articles about foundations that are serving areas located in Eighth District states.

Indiana is a hotbed of foundation activity--with at least one organized in nearly every county of the state. During the past 10 years, community foundations in the Hoosier State have grown more than 700 percent. Currently, there are 93 community foundations or county affiliates serving 90 of the state's 92 counties. The activity challenges conventional thinking that might say only large cities have the demographics needed to support philanthropic foundations and high levels of giving.

So, what's fueling the fire? Primarily, it's a $200-million commitment by the Indiana-based Lilly Endowment, the largest private foundation in the United States with $12.7 billion in assets, which created the Giving Indiana Funds for Tomorrow (GIFT) program. GIFT's purpose is to nurture the start-up or expansion of community foundations in rural areas and small- to medium-sized towns. GIFT operates by offering challenge grants for building permanent endowments, operating funds, matching grants for highly visible special projects, and training for new foundation staff.

In Indiana, community foundation assets have grown from $100 million in 1990 to more than $625 million in 1998. Most of the $525 million increase came from local community sources, and those serving medium-sized and small communities hold more than 60 percent of these assets. For example, Indiana has counties of 30,000 residents served by foundations with $8 million to $10 million in permanent assets.

Community foundations provide a boon to community development because they rally community members around local concerns. They are independent organizations that receive money from a variety of sources including individuals, corporations, government agencies and private foundations. Community foundations are designated "public charities" rather than "private foundations" by the Internal Revenue Service because they raise a significant portion of their resources--more than one-third of annual income--from a broad cross-section of the community each year.

Funds are invested to create an endowment with the earnings used each year in the form of grants that meet charitable objectives in the community. Community foundations frequently enable participating community organizations to leverage larger funding from other sources, as well as provide organizations with the tools they need to increase capacity or raise other kinds of funds.

The long-term success of communities depends on their capacity to develop good systems for continued growth. The GIFT program is helping communities pave the way for a sustainable form of funding for community development in Indiana into the future. For more information on the GIFT program, contact Jenny Kloer, GIFT Program Director at the Indiana Donors Alliance, at (317) 630-5200.

Other Community Foundation Information Sources 1997-1998 Directory of Indiana Foundations, Indiana Donors Alliance. Call (317) 630-5200, or visit www.indonors.com. Community Foundations in the United States: 1996 Status Report, Council on Foundations. Call (202) 467-0438, or visit www.cof.org. 1996 Survey of Community Foundations, Columbus Foundation. Call (614) 251-4000, or visit www.columbusfoundation.com. Foundation Giving: Yearbook of Facts and Figures on Private, Corporate and Community Foundations: 1998 Edition, The Foundation Center. Call (800) 424-9836, or visit www.fdncenter.org.