From the Executive Director

January 1, 2007

As Grotto successfully kicked off and implemented the AIFEP/Kellogg Leadership Development Program this year, it became evident that FY07 would be focused primarily on emerging leadership, particularly for the Native-American community. Grant money from the W. K. Kellogg Foundation ($180,000) provided the strong impetus to identify, train, and support American- Indian men and women to serve as both highly qualified staff and board members in philanthropy. (Read more details about the program and its apprentices on pages 7 and 8 of this report.)

In addition to the AIFEP/Kellogg Leadership Development Program, FY07 at Grotto was marked by a very productive Board/Staff retreat in February, solid performance by Grotto’s investment portfolio, and a smooth transition from one very strong program officer to another. Overall, FY07 has been another good year at Grotto.

Welcome to LaVon Lee: We extend a hearty welcome to LaVon Lee, who was chosen from a highly qualified pool of applicants as Grotto’s new Program Officer. LaVon is a former longstanding member of the Grotto Foundation’s American Indian Family Empowerment Program. Prior to the position with the Grotto Foundation, she served as an executive director of a community nonprofit serving children and families. She brings a wealth of expertise in nonprofit management, leadership development, and language revitalization.

In her new position with the Grotto Foundation, LaVon supports general grantmaking and oversees the management of the American Indian Family Empowerment Program, the Native Language Revitalization Initiative, and the Kellogg Leadership Development Project. (A full report on these programs can be found on pages 6 through 8.)

Programs

General Grantmaking —A primary activity of the Grotto Foundation, of course, is its grantmaking efforts, which have elicited an unusually large number of outstanding proposals for General Grants in recent months. While such a response is gratifying, it does become increasingly difficult to decline many of the applications received. During FY07, the total funds granted for General Grants was $603,500, distributed in 59 grants to various community organizations that provide support to individuals and families who are among the most vulnerable—refugees, immigrants, diverse, of color, women and children, homeless, unemployed or underemployed and disenfranchised by most definitions.

Native Language Revitalization Initiative —The second component of Grotto grantmaking is the Native Language Revitalization Initiative (NLRI), which has become the centerpiece of the Grotto Foundation. This year, NLRI completed its fifth year of operation, having placed Grotto Foundation on the national scene as one of the leading foundations dedicated to language recovery and revitalization.

Through the work begun by Gabrielle Strong and continued by LaVon Lee, grantee organizations are supported to learn, explore, and identify what works best in building language learning for American Indians in Minnesota, Wisconsin, and North and South Dakota. Each organization benefits by the sharing of knowledge and the building of best practices among universities, Tribal colleges, reservations, and urban programs. Funds granted for NLRI proposals in FY07 totalled $357,300.

Louis W. Hill, Jr. Fellowship —The third component of Grotto’s grantmaking is the five-year program to grant an annual Louis W. Hill, Jr. Fellowship to an outstanding community leader. Now beginning its fifth and final year, the Fellowship program enjoyed a strong turnout in FY07 at a reception honoring its fourth-year recipient, Laura Waterman Wittstock. A longtime community leader, Ms. Waterman Wittstock focused her 2006-2007 Fellowship on philanthropy in and of the Native-American community, both past and present.

In addition to the September 2006 reception for Ms. Waterman Wittstock at the Hubert Humphrey Institute of Public Affairs, the Institute was persuaded by her to also host a Louis W. Hill Fellowship forum and reception honoring Wilma Mankiller, a noted national American- Indian leader, author, and lecturer. The event was held on October 27, 2006.

The fifth Louis W. Hill, Jr. Fellow, chosen by the Selection Committee for 2007-08, is Charles M. Denny, Jr., whose distinguished community leadership has been evident in many arenas, including Honeywell Corporation, ADC Telecommunications, and numerous nonprofits and educational institutions. (Details on Mr. Denny can be found on page 9 of this report.)

Operations

This year, the Grotto staff assumed responsibility for the Foundation’s website. Staff also initiated a conversion in its computer technology and an upgrade of its phone system.

At the Board’s request, staff pursued suitable possibilities for archiving historical documents related to the Foundation and the Hill Family. Discussions have been held with representatives of the James J. Hill Reference Library and the Minnesota Historical Society.

As FY07 ended in April 2007, the staff anticipated a move within the next few months from its office on Lakeland Avenue to a different location. As noted elsewhere in this report, the new address, effective in early January 2008, is 1315 Red Fox Road, Suite 100, Arden Hills, MN 55112. The new general phone number is (651) 209-8010; the new fax number is (651) 209-8014.

Financial

In FY07, the Grotto Foundation paid $1,021,800 in grants and had expenses of $365,547, for a total expenditure of $1,387,347. Additional detail can be found in the financial statements on pages 10 and 11 of this report.

FY2008 —With the continuous hope for a favorable market to support the investment portfolio, the Grotto Foundation will strive in the coming year to continue, and to improve, its grantmaking—both in the size and the types of grants, with a stronger commitment to outcome-based funding.

In Summary

Grotto continues to be committed to making a difference for communities, families, and understanding.

Past messages from the Executive Director: