What is a community foundation?

Community foundations make up one of the faster growing sectors of philanthropy.

The first one was started in 1914 and there are now over 700 throughout the U.S. They are tax-exempt public charities created by and for the people in a local area which help build and strengthen communities. Through a community foundation, people with philanthropic interests can easily and effectively support the issues they care about — immediately, or through their estates after their lifetime.

The community foundation helps individuals, families, businesses and nonprofit organizations create charitable funds to which they may contribute a variety of assets. Donors receive a charitable deduction in the year that gifts are made. Funds can be expendable (i.e., non-endowed where the corpus of the fund can be spent in its entirety) or endowed, which limit distributions to preserve and grow the corpus. Because of this, endowments last into perpetuity. The assets of the community foundation are pooled and invested, with donors offered a choice of investment pools.

A true Community Foundation is a combination of these basic characteristics:

  • Serves as a grantmaking organization
  • Stewards a broadly-defined mission (e.g. to improve quality of life in a community)
  • Serves a geographically-defined community (a city, county, district or province)
  • 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 is an important element of sustainability

A community foundation has in-depth knowledge of its communities, keeping alert to emerging needs and relevant issues. This not only informs its grantmaking, but gives donors additional insight and information, enhancing their individual power to make a difference. Community foundations often convene diverse groups to work together on relevant problem-solving, creating bridges between donors and community-building opportunities for positive change.