What is a community foundation?

A community foundation is a tax-exempt, independent, publicly supported, philanthropic organization established for the long-term benefit of a defined geographic area. It also encourages and distributes non-permanent philanthropic funds.

Who runs a community foundation?

A community foundation is run by an independent governing body representing the broad interests of the community with members of the board serving limited terms. The board is responsible for seeing that a reasonable rate of return is achieved on all funds entrusted to the foundation along with a few other obligations.

How does a community foundation get its funds?

A community foundation actively seeks new, typically large contributions from a wide range of donors and provides assistance to those donors in fulfilling their philanthropic interests.

Who receives grants from a community foundation?

The unrestricted funds of the foundation are awarded in a competitive grant process to nonprofit agencies in the community. These agencies must be qualified 501(c)(3) organizations.

How can a community foundation help its community beyond making grants?

As our Community Foundation grows, we aspire to provide 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.

Who invests the foundation’s money?

Generally, the foundation will hire professional management for its portfolio investment. Currently, Graystone Consulting fulfills this need within our Community Foundation. The Foundation establishes the philosophy and policies for investments, but the professionals handle day-to-day decisions.

How are these investment experts picked?

The Community Foundation will have a finance or investment committee determine the investment experts.

Will the foundation ever change donors’ instructions?

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.

To whom is the Community Foundation accountable?

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. Locally, we have an outside firm review our books yearly. The Foundation is primarily accountable to the people of the area it serves.

Do I need a lawyer to talk to a foundation?

The fund agreements that establish new funds in the Foundation are made available to each donor during preliminary conversations with Foundation staff. It is always recommended that donors’ counselors review charitable-gift plans. 

How would I use my local community foundation?

A family may choose to establish a 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, saving time and personnel for the business, yet ensuring support for their selected charitable interests. 

Some donors choose to make their community philanthropy anonymous, and the Community Foundation is a perfect partner to help them.  Nonprofit agencies often establish agency 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.

How long does it take to establish a fund?

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.

Must all gifts be cash?

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 to evaluate the most effective ways to accomplish their charitable goals.

Still have questions? Contact us.