A community foundation is a tax-exempt, independent, publicly supported, philanthropic organization established and operated as a permanent collection of endowed funds for the long-term benefit of a defined geographic area.
Typically, the community foundation has an independent governing body representing the broad interests of the community with members of the board serving limited terms. The board is responsible for asset development, management oversight, grant making, and seeing that a reasonable rate of return is achieved on all funds entrusted to the foundation.
A community foundation actively seeks new, typically large contributions from a wide range of donors who are generally residents of the service area and provides assistance to those donors in fulfilling their philanthropic interests.
Who receives grants from a community foundation?Back to top
The unrestricted funds of the foundation are awarded in a competitive process to non-profit agencies in the community. Typically, a community foundation will establish guidelines and processes for distribution and work with applicant agencies on appropriate projects. Community foundations also accept some funds with restrictions placed by the donors that designate the agency or nature of the grants to be made.
How can a community foundation help its community beyond making grants?Back to top
A community foundation also provides leadership on community issues by serving as a facilitator, convener or mediator around significant community discussions. If it has the staff capacity, it may also provide technical advice to area nonprofits.
The foundation establishes the philosophy and policies for investments and authorizes an Investment Committee to direct the investing of the foundation’s assets accordingly. The foundation reviews the philosophy and policies annually. The Investment Committee meets regularly to review the investment portfolio.
Will the foundation ever deviate from a donor's wishes?Back to top
A common governing instrument, called a fund agreement, covers all gifts and funds in the foundation. This agreement includes a "variance power” to modify the use of restricted funds if such restrictions become unnecessary, incapable of fulfillment or inconsistent with the charitable needs of the community or area served. Those are the only conditions under which a foundation modifies the terms of a gift.
What happens if the community foundation goes out of business? Back to top
The community foundation is a public charity and as such, is under the supervision of the Attorney General of the State. If something happens to the community foundation, it would be the decision of the Attorney General regarding its future.
To whom is the community foundation accountable?Back to top
A community foundation files an annual return with the IRS, which is a publicly available document. In addition, most states require a state information return, which is also publicly available. The foundation is primarily accountable to the people of the area it serves and should publish an annual report that is available to all.
The fund agreements that establish donor-named funds in the foundation are made available to each donor during preliminary conversations with foundation staff. It is always recommended that the donor's individual counselors review charitable gift plans.
It is estimated that there are more than 1,000 community foundations throughout the country. They serve small communities, counties, whole regions of the state, whole states and in some cases, multiple state areas.
When was the first community foundation started?Back to top
In 1914, Frederick Goff, a Cleveland, Ohio attorney and president of the Cleveland Trust Company, started the first community foundation as a component of his bank. He had two goals: to create a philanthropic vehicle to facilitate donor's charitable intentions in perpetuity even if their original purpose became obsolete (variance power); and second, to establish a system whereby people of modest means could also engage in large scale philanthropy if they pooled their contributions.
How would I use my local community foundation?Back to top
A family may choose to establish a named fund that bears their family name and continues their community giving in perpetuity. A community group may decide to establish a fund in honor of, or memory of, a friend or community leader.
A business may choose a community foundation to help with its grant making, thus saving time and personnel for the business, yet assuring support for their selected charitable interests. Some donors choose to make their community philanthropy anonymous and the foundation is a perfect partner to help them. Nonprofit agencies often establish their endowments within a community foundation to guarantee their endowment donors that the principal of the gift is never disturbed and the earnings will forever come to the agency.
What's the difference between the United Way and a community foundation?Back to top
A United Way typically serves only its member agencies, which is a small percentage of the community health and human service organizations. It makes annual distributions for general operating support to these agencies based on its annual fund drive proceeds. The community foundation supports all areas of the community— arts and culture, education, health and human services, recreation and civic affairs--and has no members who are guaranteed annual gifts. It distributes earnings in a competitive grant making process, generally on a one-year only basis. The community foundation distributes only the earnings from its endowment and not all of the money that it holds. The community is well served to have both a United Way and a community foundation.
It is a simple process involving a meeting with a representative of the foundation and the donor to review the fund agreement form and determine the donor’s desires and the most suitable way to accomplish them. Once the donor and other appropriate counselors of the donor approve the form, the initial contribution is made and the fund is established. Generally, the fund needs to be approved and accepted by the board of the foundation at its next meeting.
How much does it take to establish a named fund?Back to top For the South Central Community Foundation, the minimum for an endowment fund is $10,000. There is an option to start a fund with $5,000 and build it up over time.
Does it require a contribution of $10,000 to be a donor of the foundation?Back to top
There is no minimum contribution that may be made to the foundation. For funds that are less than the required amount to establish a named fund, any amount may be added to existing funds.
No. The foundation is able to accept gifts of appreciated securities (which are particularly advantageous to the donor), real property, or in some cases personal property. Some foundations also accept business and partnership interests. The community foundation offers the maximum charitable deduction available for estate and gift planning opportunities. The foundation is generally able to provide information on giving techniques and assist donors in evaluating the most effective ways to accomplish their charitable goals.