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How a Community Foundation Works

A community foundation is a tax-exempt, local, public charity serving the people of an area who share a common interest — improving the quality of life in their area. Here is summary of how most Community Foundations function:

  • > The Foundation accepts donations and creates charitable funds.
  • Individuals, families, businesses and organizations DONATE to the Foundation with cash, securities, real estate, bequests, trusts and numerous other methods.

  • > The Foundation manages and invests charitable funds for growth and perpetual use.
  • With the donation, the Foundation and the donor(s) sign an agreement* and create permanent a CHARITABLE FUND.

    The Foundation then manages and INVESTS the funds – to earn income and grow the funds.

      *NOTE: The agreement specifies how proceeds (income) from investment of the fund will be used – the method of distribution of the fund’s earnings as well as the how the distribution are to be used will help the community.

  • > The Foundation awards grants to local non-profits and scholarships to qualified students from the income earned by the chartible funds.
  • With a percentage of the income earned by the Fund, the Foundation (With input from donors and members of the local community) identifies current and emerging issues, distributes the proceeds of the fund into the community – through GRANTS to non-profit organizations and SCHOLARSHIPS to area students.

    Here is an animated YouTube video created by Embolden (a division of Crown Philanthropic Solutions) that provides a quick overview of a community foundation from a donor’s perspective. (http://www.embolden.com)

    History of Community Foundations in the United States
    The first community foundation – The Cleveland Foundation – was established in 1914 by a Cleveland banker and today there are over 700 community foundations across the United States that administer more than $31 billion in charitable funds and address the core concerns of the communities they serve.

    Learn more about community foundations in the United States through the Council on Foundations.