Community foundations have a long history of supporting local and regional philanthropic efforts in the United States. In fact, the Cleveland Foundation—the nation’s first community foundation—dates back to 1914.* According to the Council on Foundations, there are more than 750 community foundations across the United States today.
A community foundation is a public charity that typically focuses on supporting charities within a specific geographical area or a particular cause. They derive most of their financial support from local donors and are governed by a board of directors or trustees. Community foundations typically accept charitable donations and grant funds to a wide variety of causes, such as community services, the arts, education, the environment, health, and disaster relief within a specific geographic region.
Program officers and other staff members at community foundations generally have a deep understanding of the local community and can leverage that knowledge to direct charitable funds where they can make the biggest impact. They often serve to bring people together who want to focus their funds and time on a common cause within a specific geographic region.
Program types and management
Community foundations offer numerous types of programs, including endowments, scholarships, and field of interest funds. Pooling your donations with those of other local donors enables you to support local or regional charities without incurring the administrative and legal costs of starting your own independent foundation. Some donors of community foundations appreciate the opportunity to interact regularly with like-minded philanthropists in their particular geographic region. The foundation is responsible for overseeing the investment and administration of donors’ funds.
Some community foundations also offer donor-advised funds (DAFs), which allow you to take an immediate tax deduction and then recommend grants to eligible charitable organizations on your own schedule.
Community foundations typically accept a wide variety of assets, including appreciated securities, real estate, and closely-held stock. As with other types of charitable giving vehicles, donors may be able to claim certain tax benefits when they donate to a community foundation. This includes a potential immediate tax deduction of up to 60% of adjusted gross income for cash donations and 30% for donations of long-term appreciated assets.
Evolution of community foundations
Community foundations were originally designed to serve a specific geographic region, such as a city, state, or region. Due to increased mobility and the Internet, however, the definition of “community” is evolving at some community foundations. The word "community" today may encompass a particular cause or interest, without any geographic boundaries. As a result, some community foundations today allow donors to support national and international charities.
Generally, community foundation DAF programs have a higher initial contribution requirement and higher administrative fees than a public charity that is the sponsoring organization of a national DAF program, yet the costs are typically lower than a private foundation. Therefore, a community foundation may be a good choice for those who are focused primarily on supporting a specific region, cause, or local organization. Additionally, the policies of a community foundation will be informed by the scope of their stated mission. For example, a community foundation that is focused on specific cause areas will generally steer donors to give to support those causes. Policies that might be more restrictive at a community foundation with a narrower mission than a national DAF sponsoring organization include grant-making policies and account succession planning options.
If you and your family want to make charitable donations that can make an impact beyond the boundaries of a particular city, state, or region, determine whether your local community foundation offers a DAF option and if so, whether the mission of the community foundation is in line with your family’s giving goals. If not, establishing a donor-advised fund at a national sponsoring organization that is agnostic to cause area and geography may be an option worth exploring.