Community foundations are tax-exempt charitable organizations created by and for community members seeking philanthropic leadership and guidance. These organizations provide a simple, powerful, and highly personal approach to giving. They offer a variety of giving tools to help people achieve their charitable goals.
Compared to private foundations
Community foundations resemble private foundations, as both are grantmakers. They are unlike private foundations in that they enlist multiple donors, a constant influx of funds from new donors, and boards that, by law, must represent the community rather than the foundation ‘s primary donors.
Establishing a private foundation or trust takes time—something often in short supply for investors, especially when facing a December 31 deadline. Quite frankly, it only takes one day, sometimes less, to set up a fund at a community foundation.
Offer a variety of funds
Community foundations offer a number of funds which provide charitable giving solutions, including, but not limited to:
- Donor Advised Funds: One of the most popular paths, these funds enable donors to take their time recommending charities to support.
- Field of Interest Funds: These funds distribute money to charities focused on one specific area.
- Designated Funds: Designed to distribute funds to one specific charity over time. This ensures that a small charity won’t be overwhelmed by a large donation it can’t handle.
Help create charitable giving strategies
Creating a charitable giving strategy involves experience, insight and an understanding of community needs. It also requires the ability to research and evaluate whether non-profit organizations can fulfill their missions effectively and efficiently. Community foundations assist donors with their financial contributions by:
- Helping donors become more effective donors by providing education and networking with donor-peers.
- Reducing administrative workloads by offering donor advised funds as an alternative to private foundations.
- Providing insight about local issues and nonprofits to help maximize the impact of the donation.
Similar, but different than non-profit organizations
Community foundations are similar to non-profit organizations, as they seek funds from community members; but unlike non-profit organizations, as they deliver few direct services to the community. Instead, they grant support to non-profits to appropriately deliver community-beneficial services.
Non-profit organizations primarily have one field of interest, as compared to community foundations, which address the well-being of the total community. Non-profit organizations asks donor to support their missions; community foundations serve the interests of the donor, and also accepts unrestricted funds for the general good of the community.
Benefits of community foundations
- Community foundations provide personalized service, helping individuals, families, businesses, and non-profit organizations achieve their charitable and financial goals by offering tools and resources that make giving easy, flexible, and effective.
- Community foundations are local organizations staffed by people from local communities and led by local boards of trustees. These people have an in-depth knowledge of the issues, opportunities, and resources that shape your community, enabling them to play a key role in solving community problems, while helping donors learn more about local needs in order to make their giving as effective as possible.
Helping donors meet their philanthropic goals
Community foundations provide personalize attention to its donors. Some employ staff and most all access philanthropic leaders to help donors learn about community needs, assess giving opportunities, refine charitable goals, and/or create personal giving plans. These leaders can be placed in two primary categories.
- Professional Advisors – represented by accountants, attorneys, estate planners, financial advisors, and insurance agents, they:
- Address tax planning needs
- help with personal investments, charitable goals and needs.
- Facilitate complex forms of giving and execute technical giving instruments
- Philanthropic Advisors – represented by leaders and consultants like NPcatalyst, they:
- Address giving interests and motivations
- help create charitable giving plans which are integrated into business and personal giving decisions
- find nonprofits that meet your interests and charitable goals
- provide in-depth information about non-profits
Donors seeking greater philanthropic impact should consider the role of community foundations. A “new” concept when the first was created in 1914 in Cleveland, Ohio, it’s now an opportunity found in hundreds of communities. In fact, there are more than 650 community foundations serving urban and rural communities throughout the United States. Collectively, they hold approximately $31 billion in combined assets and make local grants of approximately $2.6 billion annually.
Donors will be hard pressed to find more valuable community stewards, so focused on the improvement of quality of life in local communities.