what is a community foundation?
A community foundation is a tax exempt, nonprofit, publicly-supported, philanthropic institution with the long-term goal of building permanent, named funds for the broad-based charitable benefit of the residents in a given area.
The common mission of every community foundation is to enhance the quality of life in the local area. Community foundations carry out this very broad mission by building a permanent endowment fund and using the annual income to support a variety of local nonprofit organizations through grants and special projects.
how does a community foundation work?
A community foundation is governed by a board of directors of community leaders and is administered by professional staff. Operating expenses are paid from management fees, through grants and partnerships with local foundations, and from gifts designated by donors to cover operating costs.
how do community foundations differ from private foundations?
A community foundation is supported by a broad group of unrelated individuals, families, corporations and institutions who wish to improve local communities. Because of our broad base of support, community foundations are classified by the IRS as publicly-supported charities. This gives community foundations tax advantages not enjoyed by private foundations.
Private foundations, by contrast, are generally supported by an individual, family or business. Rarely does it make sense to establish a private foundation if the principal endowment is not large. Gates, MacArthur, and Kellogg are examples of private foundations. Private foundations are often subject to more penalty taxes and legal requirements by the IRS than are community foundations. Click here to learn more.
how do community foundations differ from other nonprofit organizations?
Most nonprofit organizations have a specific mission. By contrast, a community foundation’s mission is very broad: to improve the quality of life in a given area. This breadth of mission reflects our ability to make grants in any field of interest with a charitable benefit to local communities.
This flexibility allows us to serve a wider group of potential donors on the one hand and, on the other, a wider group of nonprofit organizations whom we consider our partners in improving local communities.
how do community foundations differ from the united way?
While the United Way tends to focus on essential human needs and charities, which provide social services, community foundations serve all needs in a given area. We support most organizations the United Way supports, but we also support recreation, arts and culture, education, community and economic development, scholarships, and special projects.
The United Way focuses its work on an annual workplace fundraising campaign. Funds raised during a given year are generally used that same year. Community foundations, by contrast, do not mount annual campaigns, seeking instead to attract large, long-term gifts.
Community foundations focus on attracting and managing permanent endowments. Most chapters of the United Way do not attempt to manage long-term funds or permanent endowments.