Report urges JCF overhaul endowments structure

Despite the S.F.-based Jewish Community Federation's success in amassing one of the largest endowment funds in the country, a harsh report calls for a massive revamping of the fund's decision-making.

And the federation's top leaders — with some reservations — agree.

The independent report, to be released by the end of May, cites mistrust, antagonism and suspicion surrounding the power structure that manages about $300 million in endowment assets. Criticism, according to the study, comes from a broad range of federation lay leaders, beneficiary agencies and local foundations.

Descriptions of the current situation include such phrases as "too tightly controlled," "elitist," "out of touch" and "oligarchy."

The 43-page report attributes those perceptions to several factors but focuses on a view that too much control has been concentrated with the Jewish Community Endowment Fund's executive director. Though not named in the report, Phyllis Cook has held that position since 1983.

The study also notes an imbalance of power and coordination between federation lay leaders who distribute money from the JCF's annual fund-raising campaign and those who allocate the endowment's funds; a feeling that the endowment has a separate agenda, despite being part of the federation; and ignorance about how the endowment makes its grant decisions.

This week, the federation's top leaders called some of the report's contents exaggerated, or the result of misunderstanding. But they also plan to formally follow up on the report's recommendations for change.

"The bottom line on the report is that people view the endowment and the federation as two different organizations," said Alan Rothenberg, the federation's board president. "I want people to look at us as one federation, not two."

Wayne Feinstein, the federation's executive vice president and Cook's supervisor, said he was a "bit concerned with the starkness" when he first read the report. But overall he considers the report's suggestions "useful" for the federation's latest self-evaluation.

Gary Tobin, the report's main author and director of Brandeis University's Cohen Center for Modern Jewish Studies, said the study's primary thrust is that JCEF's current power structure doesn't work.

"Nearly everybody interviewed was extremely positive about how much money the endowment fund has accumulated and how well these funds are managed," he said. But "nearly all the people were extraordinarily critical of the way the system operates."

Two Jewish federations and five foundations outside the Bay Area commissioned the research as part of a series of reports on endowments and foundations. The report, titled "An Exploration of Jewish Federation Endowment Programs," compares and contrasts the endowments at two federations — San Francisco and Cleveland.

The research consisted primarily of interviews with community leaders in each city to gauge their attitude toward their respective endowment funds.

The 26 people interviewed in Cleveland responded with overwhelming enthusiasm, particularly regarding how tightly the endowment fund is integrated into the federation's overall planning.

At the same time, the 36 people interviewed in San Francisco responded with reams of harsh, sometimes scathing criticism. All the interviews were anonymous, though Tobin described many of the individuals as the "most highly involved people, the heart and soul of the federation."

Tobin, whose offices are in San Francisco and Waltham, Mass., said he "was surprised by the almost unanimous views. I was especially surprised because many of the people's names were provided by the federation."

Conducting such research is extremely important now, he said, because endowments have grown so rapidly, especially during the 1990s.

Nationwide, federation endowment programs have witnessed spectacular growth in the past two decades. Altogether, their assets grew from $250 million in 1975 to $4.2 billion in 1996.

Tobin attributes the immense growth to tax incentives, increased wealth and the desire among donors to exercise more control over their money.

However, Tobin said, little if any research has been done so far about the institutions that manage that money.

San Francisco's endowment, which received its first gift in the early 1920s, has done particularly well in the past few years. Its assets tripled from $98 million in 1991 to nearly $298 million last year, according to the report.

In the same time period, Cleveland's assets nearly doubled, from $267 million to $518 million — making it second only to New York's federation in total assets.

Yet, the report asserts, "the successful accumulation of assets within a federation cannot be the only measure of success. The federation must be a central community-building organization…How the federation makes decisions is as important as the decisions themselves."

Though Feinstein and Cook agreed that the decision-making process is crucial, they noted that only a small percentage of San Francisco's endowment money is "unrestricted" and allocated by federation lay leaders.

In general, endowment funds pay for new projects or emergencies not financed by the annual federation money-raising campaign. Some of the endowment money is "unrestricted," which means it can go for any purpose within the organization's guidelines. Other endowment money is "restricted" and can be spent only according to the donor's predetermined wishes.

Of last year's $22 million in grants from San Francisco's endowment, Feinstein and Cook noted, just $2 million was earmarked as "unrestricted."

Cook added that the growth in San Francisco's funds isn't an aberration. "It shows trust in our process," she said.

Apparently, some people question that trust. The new report particularly berates the power vested in the executive director's position of San Francisco's endowment.

"The San Francisco endowment program's relative independence from federation planning facilitates a concentration of power in the endowment director position," the study states. As a result, agencies view the grant-review process as "too tightly controlled and elitist."

Until recently, the endowment director was almost exclusively the federation professional who served on the board of trustees of all supporting foundations. And the endowment director has handled all presentations of grant requests to lay leaders.

Tobin cautioned that the report wasn't a personal attack on Cook.

"If structurally the report indicates that there is too much power in the endowment director position, it doesn't make any difference who that person is," he said.

Cook contested that section of the report, saying those perceptions about her position's power must result from a lack of understanding.

"The lay people are in control here," she said.

At the same time, Cook said she was willing to hear people's opinions on the endowment's structure.

"I'm very open to criticism and eager to learn from it," she said.

In the study's interviews, researchers found other problems associated with the endowment's independence from the federation's overall planning.

"This structural characteristic creates the perception among nearly all interviewees that the endowment program is not responsive to community priorities and has its own separate agenda," the report asserts.

That "bifurcation" within the San Francisco federation is "confusing and ultimately destructive for the federation as a central community institution in its relationship with both constituent agencies and foundations," the report says.

Some of that separation is apparently done for a reason, however.

"The endowment program is seen by some as a safe haven for donors who are mistrustful of the planning and allocations process," the report continues. The endowment, therefore, allows these donors to support the federation without handing over decision-making to people they don't know or trust.

The report outlines a handful of recommendations for change:

*Convene a task force to rethink the federation and endowment's decision-making structure.

*Allow more federation staff members to serve on supporting foundation boards.

*Integrate endowment grant-making with overall federation planning.

*Shuffle the lay leaders' responsibilities so that "major donors" aren't concentrated in endowment committees and "smaller donors" in annual-campaign committees.

*Create more flexibility in how endowment money can be spent — but stick to published guidelines.

*Work more closely with Jewish family foundations.

Feinstein called those recommendations "helpful" and "timely," saying they dovetailed with ideas that have emerged within the federation over the past two years.

A task force such as the one suggested in the report, for example, has been organizing since early this year, Rothenberg said. The task force will meet this summer, include the report in its discussions and offer suggestions in the fall.

"I'm not unhappy or angry with what Gary wrote — or in total agreement." Rothenberg said. "But some of it has logic to it."