What is a Community Foundation?
Community foundations exist as a means for local citizens to make a difference in their communities, managing their funds to ensure that every charitable dollar contributed generates the greatest possible impact over an extended time.
They share a common mission to help donors make the most of their donations and to take advantage of the services and knowledge offered by professionals with expertise in local and financial matters, while providing donors with significant financial advantages, tax savings and recognition.
Endowments are built through contributions from many donors, usually within a given geographic region. Endowments range in size from a few thousand dollars to more than $1 billion.
They support charitable activities focused primarily on local needs – those of a particular town, county or state. They are designated public charities rather than private foundations by the IRS because they raise a significant portion of their resources from a broad cross-section of the public each year.
Additionally, community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting private foundations.
TYPES OF FUNDS
Unrestricted Funds
Designed for donors who want to help their community but don’t have any specific cause or organization in mind. The community foundation is given the authority to allocate grants as it sees fit. This type of fund gives community foundations the capital needed to enact long-term solutions to social problems as well as respond quickly to emergency situations.
Donor Advised Funds
Donor-advised funds give donors the chance to have a say in the decision-making process. The donor may make recommendations as to how much money goes where. Foundations will generally do their best to enact all suggestions (usually dependent upon whether the organization designated is a non-profit organization, classified as a 501(c)(3) by the IRS.)
Field of Interest Funds
These funds allow donors to specify a field of interest to be supported, without specifying individual charities. The foundations then make grants to appropriate local organizations serving the designated need.
Designated (restricted) funds
Similar to donor-advised funds. Donors, however, make their recommendations for grant dispersal when they establish the fund, rather than making multiple suggestions over time. Often, this type of fund is set up as a means of supporting a single organization over an extended period of time.
Agency Endowment Funds
These are stablished by nonprofit organizations in the interest of building their own endowments. Income from these funds provides the organizations with a source of revenue they can rely on, increasing self-sustainability and financial security.
Administrative Endowment Funds
These funds are ledged to support the community foundation itself, specifically day-to-day administrative operations. Donors set up this type of fund as a means of assisting the foundations in all of their projects, building up infrastructure and reducing the fees charged for fund management.
Community foundations offer useful solutions for civic-minded donors looking to make a difference through philanthropy. Download or view this Microsoft PowerPoint presentation for even more specific information.
. . . Connecting People Who Care
. . . With Causes That Matter
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