Formation and Structure of a Community Foundation

Abstract

1.1 Introduction Community foundations are one of the fasting growing sectors of philanthropy in the United States today. Each community foundation has individual characteristics that contribute to the improvement of its own community. As a charitable organization, community foundations make grants to sectors of the community for emerging needs. 1.2 About Philanthropy Philanthropy is the philosophy and practice of giving to nonprofit organizations through contributions. Philanthropic agencies collect gifts from donors and then distribute the funds to areas of need in the community. Philanthropic organizations act as the market mechanism in its "economy". The supply of donor contributions are granted to meet the demand of needs through the market mechanism, known as philanthropy. 1.3 Description of a Community Foundation Community foundations receive different types of funds from private sources and manage them for charitable purposes. The primary purposes of community foundations are to seek funds from donors, allocate and distribute these funds, and provide leadership for community activities. The importance of involvement by community foundations in community development continues to grow with the diminishing role of government support for such programs. 1.4 How Community Foundations Differ from other Foundations Foundations are organized in accordance to federal tax law. They are considered public charities by such laws, having tax advantages over other types of foundations. Additionally, there are special differences between community foundations and private foundations. Such differences are the recognition of exemptions for community foundations and advantages for donors who contribute to community foundations. 1.5 Creating a Community Foundation: Beginning Factors Two basic prerequisites for the success of a community foundation are a community sufficient in population and wealth to sustain growth and intelligent action before the foundation is launched to ensure long-term success. 1.6 Organizational Documents Community foundations are created and controlled by their governing instruments. The Articles of Incorporation and Trust Agreement designate the operations of the foundation, determine the powers of the board of Trustees, and specify how assets are to be distributed. 1. 7 Developmental Plan For a community foundation to realize its full potential and to eliminate confusion, a comprehensive development plan is stated. An overall development plan acts as a guideline for the board of trustees by stating the policies for raising funds and helping the community foundation attract the necessary capital to exist. 1.8 Grantmaking Community foundations grantmaking activities are both diverse and flexible. Major areas of grantmaking include education, health, culture and the arts, human services, and economic development. When issuing grants to these areas, it is critical that community foundations choose the right project to fund, demonstrating that the charitable purpose specified in its governing documents are being furthered. 1.9 Conclusion All elements of the community foundation make it the fasting growing sector of philanthropy today. As charitable organizations, community foundations are requested to make grants to the community that are of charitable purposes. Because of the diminishing role of government in support of community programs, the importance of the involvement of community foundations in community development continues to grow.