A community foundation is a philanthropic vehicle that combines the charitable gifts of many, to provide leadership and financial leverage in addressing the current and future needs of the community, through grant-making activities designed to improve the lives of the citizens of that community.
The six main characteristics of Community Foundations are:
Serves a geographically-defined community
Has a broadly-defined mission (e.g. to improve quality of life in the community)
Serves as a grant-making organization
Is supported by a broad range of private and public donors and seeks charitable contributions primarily from inside the community
Is governed by a diverse local board reflecting the community
Builds capital endowments, which are an important element of sustainability
It is the combination of these six basic characteristics that makes a true Community Foundation, although there are many other types of organizations that have some of these characteristics. Community Foundations are designated public charities by the Internal Revenue Service because they raise a significant portion of their resources from a broad cross-section of the public each year.
Vehicle for Philanthropy
Community foundations offer donors many advantages. They work with individuals, families, attorneys, and estate and financial planners to design gift plans tailored to meet diverse economic situations, maximizing the benefit donors receive from their contributions as well as the impact of their philanthropic dollars. Community foundations’ in-depth knowledge of local issues enables donors to invest in issues they care about.
They make giving easy and effective, accepting a wide variety of gifts and providing donors a number of charitable options. You can contribute cash, stocks, property, and bequests. You may establish a fund in your name or in the name of a loved one. In most cases, your gift qualifies for maximum tax advantage under federal law.
Each community foundation functions, in effect, as a philanthropic and grant-making collective. A unique characteristic is that community foundations make it possible for whomever establishes a fund to make certain the money serves specific charitable purposes. At the same time, however, a community foundation pools all of its funds for investment purposes – making it possible for individual, small funds to achieve economies of scale.
Community foundations achieve their charitable goals though the work of other nonprofits. They help donors make a positive impact on their community by establishing a “bridge” between the donor and charitable activities. Community foundations make grants from their endowments, both from unrestricted funds, and from funds with restrictions placed on them by the original donors. Unrestricted funds enable the foundation to respond to the community’s changing needs and emergencies, to support the creation of innovative responses to community problems, and to enhance the quality of community life.
Restricted funds could be Designated Funds, which support a specific institution in perpetuity; or Field-of-Interest Funds, which support broad areas of concern, such as education, the arts, environment, youth services, or the aged; or Donor-Advised Funds, which allow donors to make suggestions for distributions to specific charities; or Scholarship Funds. Each community foundation has its own schedule and set of criteria for grant making.
Community foundations are in the business of building communities. They invest in the long term and bring people and organizations together, convening diverse voices to address local issues and opportunities.
An increasingly important role for community foundations is to take the lead in addressing important issues in the communities they serve. Community foundations often convene diverse groups to work together on relevant problem-solving, creating bridges between donors and community-building opportunities for positive change.
A community foundation has in-depth knowledge of its community, keeping alert to emerging needs and relevant issues. This not only informs its grant-making, but gives donors additional insight and information, enhancing their individual power to make a difference.
Traditionally this has focused around community needs, asset growth, helping existing nonprofits in ways that go beyond check-writing, catalytic leadership around critical issues, and neighborhood development. But it can also involve identifying social and environmental problems, infrastructure needs and the implementation of potential solutions by providing important start-up funding for an innovative community solutions.