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What
is a Community Foundation?
A community foundation is a public 501(c)(3) charity that serves
as a vehicle for community philanthropy. The community foundation receives
contributions both large and small from donors — including individuals,
organizations and corporations — pools them for investment purposes,
and reinvests in the community through grants to local charities. Community
Foundation Sonoma County is one of more than 600 community foundations in
the United States.
What is the advantage of a community foundation
over a private foundation?
Community foundations,
in addition to being knowledgeable about local needs, provide an array of
services to donors who wish to establish endowed funds without incurring
the administrative and legal costs of starting and operating a private foundation.
What is endowment?
Endowment defines
charitable gifts permanently invested for current and future needs. A percentage
of the endowment fund balance is distributed each year for charitable purposes.
As the endowment grows, more funds are available for the community.
How are the Community Foundation's assets managed?
Component funds of the Community Foundation are combined into an investment
pool for both economy of management and for access to the best possible management
and advisory talent available.
Our investments performed well in 2002 relative to our policy index which is the benchmark we use to compare our investment returns to appropriate investment indices such as the S&P 500. Our policy of diversification and the exceptional performance of certain asset managers served us well in the third consecutive year of a bear market.
For the year ending December 31, 2002 our main pool's return (net of fees) of -0.10.7% slightly exceeded our policy index return of -10.8%. Our portfolio's return for the last three years averaged -3.1%, 2.6% better than our index. The five-year return averaged 2.9%, which was 0.8% above the index. We also continue to perform in the top quarter of reporting community foundations for three-year and five-year results.
At year-end the market value of the investment pool exceeded $38 million.
We opened our Socially Responsible Investment Pool in May 2001. The pool, now at $3.7 million, returned -13.4% for the year, 0.8% lower than its policy index. This underperformance relates primarily to the fees charge by mutual fund managers, which are generally higher because fo the additional work involved in maintaining social screens.
In 2002 our Board approved an investment policy for an Intermediate Term Investment Pool. This new pool will offer an attractive vehicle for the increasing number of donations we receive that are intended to be granted out within 2-5 years. Please contact us if you are interested in learning more about this pool
For its long-term investments, the Community Foundation focuses on a long-term strategy that will protect and increase assets over time. Investing in order to sustain endowment funds requires an acceptance of market volatility. Without such risk, we cannot even hope to achieve the return needed to sustain endowment funds over the long term. The investment policy specifies a target asset allocation among seven major categories of equity and fixed income investments. Our policy requires that the portfolio be regularly rebalanced to its target allocations to maintain a balanced and diversified investment strategy.
Local professional volunteers comprise the Investment Advisory Committee,
which meets regularly to guide our investment policies and monitor the
performance of professional firms selected to manage our pool of funds.
The Committee is instrumental in ensuring that our well-managed portfolio
will produce an ever-increasing income stream for the long-term benefit of
the people of Sonoma County.
How are decisions made about who receives grants?
Applicants for competitive grants submit letters of intent describing
the project or program they wish to be funded. These letters of intent are
reviewed by the Community Foundation staff, with input from a distribution committee of community
volunteers and members of the board of directors. This committee evaluates
all applications for DeMeo Grants and Focused Grants and makes a recommendation
to the Community Foundation's full board, which makes funding decisions.
All grants are approved or designated for approval by the Foundation's board
of directors.
How much does the Community Foundation grant each
year to nonprofit organizations?
In 2004, Community Foundation Sonoma County paid over $5 million in grants, bringing the total to more than $57 million
since the Community Foundation was established in 1983.
What is a supporting organization?
A supporting organization, like the DeMeo
Teen Club, Inc., is a charity that supports a public charity. An alternative
to a private foundation, it is a distinct legal entity that has its own
governing board, but as a supporting organization of a public charity, its
actions are subject to the influence of the board of directors of the community
foundation it supports. The majority of the members of the DeMeo Teen Club
Governing Board are selected by the Community Foundation's Board of Directors.
Does the Community Foundation receive funding from city, county and state
government?
No. the Community Foundation is a public 501(c)(3) charitable
foundation. Its funds come from donations from individuals and organizations
and from grants from private foundations.
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