Jump to a Section
- What Is a Community Foundation?
- How Does a Community Foundation Work?
- What Does a Community Foundation Do?
- Why Does Local Knowledge Matter?
- What Types of Charitable Funds Can You Open?
- Community Foundation vs. Private Foundation
- Community Foundation vs. Commercial Donor-Advised Fund Sponsor
- How Community Foundations Support Family Philanthropy
- What Is San Diego Foundation?
- How to Work With a Community Foundation
- Frequently Asked Questions
Community Foundations: Key Takeaways
- A community foundation is a tax-exempt public charity that brings together charitable resources from individuals, families, businesses and organizations to benefit a geographic community.
- Community foundations typically manage charitable funds, invest charitable assets, make grants and help donors understand nonprofit organizations and community needs.
- Unlike a private foundation, a community foundation generally receives support from many donors and handles much of the administration associated with charitable funds.
- Community foundations may offer donor-advised funds, endowments, designated funds, field-of-interest funds, scholarship funds and other charitable giving options.
- Local knowledge is a defining part of the community foundation model because these organizations build relationships with nonprofits, donors and community partners over time.
- San Diego Foundation is a community foundation serving the San Diego region since 1975.
What Is a Community Foundation?
A community foundation is a tax-exempt public charity that brings together charitable resources from individuals, families, businesses and other organizations to support a geographic community.
Community foundations typically manage charitable funds, make grants to nonprofit organizations, invest charitable assets and help donors understand community needs and giving opportunities.
Unlike a private foundation, which is generally funded by one individual, family or corporation, a community foundation receives support from many sources and serves a broader charitable community.
A defining characteristic is its connection to place.
Community foundations develop knowledge about the regions they serve and build relationships with local nonprofits, donors, civic leaders and other partners.
How Does a Community Foundation Work?
The community foundation model is built on the idea that charitable resources can be combined with local knowledge to benefit a community over the long term.
The first community foundation model emerged in Cleveland in the early 20th century as a way to pool charitable resources into a permanent source of support for the community. The model has since spread throughout the United States and beyond.
While every organization operates somewhat differently, a community foundation generally performs several connected roles.
Donors Contribute Charitable Assets
Individuals, families, businesses and other organizations contribute assets for charitable purposes.
Depending on the community foundation and type of charitable fund, gifts may include cash, publicly traded securities, real estate and certain other assets.
The Foundation Manages Charitable Funds
A donor may contribute to an existing fund or establish a charitable fund based on particular goals.
The community foundation handles administration associated with those funds, which can include recordkeeping, investment management, grant processing and nonprofit due diligence.
Grants Support Nonprofit Organizations and Community Priorities
Some funds allow donors to recommend grants to eligible nonprofits. Other funds are established to support a particular organization, field of interest, scholarship program or community priority.
Community foundations may also make grants from unrestricted or discretionary resources to address needs and opportunities identified within the region.
Charitable Assets Can Support Future Generations
Some charitable funds are structured as endowments.
An endowment is designed to preserve charitable capital for the long term while making resources available for charitable purposes over time. This allows donors to support causes or communities beyond their lifetimes.
What Does a Community Foundation Do?
Community foundations operate at the intersection of philanthropy and community.
Their work often includes:
- Managing charitable funds
- Investing charitable assets
- Processing grants to eligible nonprofit organizations
- Helping donors develop giving strategies
- Researching nonprofit organizations and community needs
- Supporting local initiatives
- Convening donors, nonprofits and community partners
- Supporting collaborative philanthropy
- Establishing endowments and legacy funds
- Helping families organize multigenerational giving
The combination matters.
A financial institution can manage assets. A nonprofit organization can address a particular mission. A community foundation is designed to connect charitable resources with a broader network of community organizations, causes and needs.
That makes the community foundation not simply a place to hold charitable assets but a potential philanthropic partner.
Why Does Local Knowledge Matter?
One of the primary differences between a community foundation and many other charitable giving providers is knowledge of the community it serves.
Community foundations develop relationships with nonprofit organizations and community leaders over time. That can help them understand both highly visible issues and needs that receive less public attention.
For a donor interested in San Diego, for example, local philanthropic knowledge might help answer questions such as:
- Which nonprofits are addressing a particular issue?
- What challenges are emerging in different San Diego County communities?
- Where are organizations already collaborating?
- Which programs serve particular populations or geographic areas?
- Where might additional charitable funding have meaningful impact?
- How can donors with similar interests work together?
This does not mean donors must give locally. Depending on the type of charitable fund, community foundation donors may also be able to recommend grants to eligible nonprofits elsewhere in the United States or internationally.
The distinction is that a community foundation can provide a local lens when donors want one.
What Types of Charitable Funds Can You Open?
Community foundations may offer several types of charitable funds, with each designed for different philanthropic goals.
Common options include the following.
Donor-Advised Funds
A donor-advised fund, or DAF, allows a donor to make an irrevocable charitable contribution to a sponsoring public charity and then recommend grants to eligible nonprofit organizations over time.
The sponsoring organization owns and administers the charitable assets while the donor retains advisory privileges regarding grant recommendations.
Community foundations are one type of charitable organization that sponsors donor-advised funds.
Endowment Funds
An endowment fund is intended to provide charitable support over the long term.
Rather than distributing all of the fund’s assets immediately, an endowment is invested with the goal of supporting charitable purposes over many years or generations.
Designated Funds
A designated fund is created to support one or more specific nonprofit organizations.
This can be useful when donors know the organizations they want to support and want to establish ongoing charitable funding for them.
Field-of-Interest Funds
A field-of-interest fund supports a particular issue, population, geographic area or charitable purpose rather than one named nonprofit.
For example, a donor might establish a fund focused on education, the environment or families and children.
Scholarship Funds
Scholarship funds provide educational awards based on established charitable criteria and applicable requirements.
Legacy Funds
Donors may also arrange charitable gifts that take effect through their estate plans, allowing philanthropy to continue after their lifetimes.
The appropriate structure depends on what a donor wants to accomplish, when the donor wants to give and how involved the donor wants to be in future grantmaking.
Community Foundation vs. Private Foundation
Community foundations and private foundations can both support charitable giving, but they are different structures.
| Feature | Community Foundation | Private Foundation |
|---|---|---|
| Tax classification | Generally classified as a public charity | Classified as a private foundation |
| Funding sources | Receives charitable support from multiple donors and sources | Typically funded primarily by an individual, family or corporation |
| Governance | Governed by an independent board | Governed by the foundation’s own trustees or directors |
| Administration | Provides centralized charitable administration | Responsible for its own administration and compliance |
| Giving structures | May sponsor donor-advised funds and other charitable funds | Operates as its own legal charitable entity |
| Community expertise | May provide nonprofit research, local knowledge and philanthropic guidance | Trustees typically direct the foundation’s own grantmaking |
| Primary focus | Serves broad charitable purposes or communities | Often reflects the mission established by its founders |
Private foundations can offer families significant control over governance, investment and grantmaking decisions. They can also involve additional administrative, regulatory and tax responsibilities.
A charitable fund at a community foundation provides a different approach. The community foundation handles much of the administration while the donor focuses on charitable goals and, where applicable, grant recommendations.
For some families, a donor-advised fund at a community foundation can therefore serve as an alternative to creating or continuing a standalone private foundation.
The tax rules that apply to contributions, foundations and charitable funds vary according to the type of gift and the donor’s circumstances. Donors considering significant gifts should consult their tax, legal or financial advisors.
Community Foundation vs. Commercial Donor-Advised Fund Sponsor
Community foundations are not the only organizations that sponsor donor-advised funds.
National charities affiliated with financial services companies also offer DAFs. The basic charitable structure may be similar, but the experience and services can differ.
The central distinction is purpose and community connection.
A commercial DAF sponsor may be particularly focused on administering charitable accounts efficiently at scale. A community foundation combines charitable fund administration with a broader community mission.
Community foundations may provide:
- Knowledge of local nonprofit organizations
- Information about community priorities
- Philanthropic advising
- Research about giving opportunities
- Connections with other donors
- Community events and educational opportunities
- Opportunities for collaborative giving
Community foundation administrative fees also support the operation of a charitable organization and its philanthropic mission.
Neither model is automatically right for every donor. The important question is what type of philanthropic relationship and support best fit the donor’s goals.
How Community Foundations Support Family Philanthropy
Philanthropy can also provide families with a way to explore shared values across generations.
Traditionally, some families have created private family foundations to establish a charitable mission, involve family members in grantmaking and pass philanthropic values from one generation to another.
A community foundation offers another approach.
Families can establish charitable funds and involve children, grandchildren or other relatives in discussions about:
- Family values
- Charitable priorities
- Community issues
- Nonprofit organizations
- Grant recommendations
- Long-term philanthropic goals
- Family legacy
With a donor-advised fund, for example, a family can participate in charitable decision-making while the community foundation handles fund administration.
The result can be a structured family philanthropy program without creating a separate private foundation.
What Is San Diego Foundation?
San Diego Foundation is a community foundation serving the San Diego region.
SDF was founded in 1975, when a group of civically engaged San Diegans founded the organization as The San Diego Community Foundation to serve community needs and philanthropic causes throughout San Diego County.
Today, San Diego Foundation works with donors, nonprofit organizations, civic partners and others to connect charitable giving with community needs and opportunities.
Its work illustrates the two sides of the community foundation model:
Supporting donors in their philanthropy while also supporting solutions for the region it serves.
San Diego Foundation reports more than $2 billion in grants since 1975, $1.6 billion in assets and approximately 2,400 charitable funds.
Those resources represent charitable giving from thousands of people and organizations over multiple generations.
The scale is important, but the community foundation concept is broader than the numbers. Its purpose is to create an infrastructure through which philanthropy can continue serving a region as its people, needs and opportunities change.
How to Work With a Community Foundation
You do not need to begin with a particular charitable vehicle.
A more useful starting point is deciding what you want your philanthropy to accomplish.
1. Identify What Matters to You
Consider the causes, communities or organizations you most want to support.
Your interests may be highly specific or still developing. Community foundation staff can help donors learn more about nonprofit organizations and areas of need.
2. Decide When You Want to Give
Some donors want to establish a charitable fund during their lifetimes.
Others want to include charitable giving in an estate plan. Many combine current giving with a longer-term philanthropic legacy.
3. Consider the Assets You Want to Give
Cash is only one type of charitable contribution.
Depending on the charitable organization and circumstances, other assets may also be accepted. Complex gifts should be discussed with the community foundation and the donor’s professional advisors before a transaction takes place.
4. Choose a Charitable Structure
Consider whether your goals are best served by a donor-advised fund, endowment, designated fund, field-of-interest fund, scholarship fund or another charitable arrangement.
5. Think About the Role You Want Your Family to Play
If philanthropy is part of your family’s legacy, consider how children or future generations could participate in charitable decision-making.
6. Ask What Kind of Partnership You Want
Finally, consider what you want beyond administration.
Do you want information about community needs? Nonprofit research? Help developing a giving strategy? Opportunities to meet other donors? Support for multigenerational philanthropy?
Those questions can help determine whether working with a community foundation fits the way you want to give.
Community Foundations Connect Generosity With Community
A community foundation is ultimately built around partnership.
Donors bring generosity, charitable interests and resources. Nonprofits bring expertise, services and relationships with the people they serve. Community partners bring additional perspectives and capabilities.
A community foundation can help connect those pieces.
For San Diegans who want to better understand local needs while organizing their charitable giving, that combination of philanthropic services and community knowledge is what distinguishes the community foundation model.
Frequently Asked Questions About Community Foundations
What is a community foundation?
A community foundation is a tax-exempt public charity that manages charitable funds and supports nonprofit organizations and community needs within a defined geographic region. It typically receives contributions from many individuals, families, businesses and organizations.
What does a community foundation do?
A community foundation manages charitable assets, administers charitable funds, makes grants, researches community needs and helps donors support nonprofit organizations and causes. Many also convene donors, nonprofits and other community partners.
Is San Diego Foundation a community foundation?
Yes. San Diego Foundation is a community foundation serving the San Diego region. It was founded in 1975 as The San Diego Community Foundation and later became San Diego Foundation.
Is a community foundation a public charity?
Yes. Community foundations are generally classified as public charities rather than private foundations. They typically receive support from many donors and use charitable resources to serve broad community purposes.
What is the difference between a community foundation and a private foundation?
A community foundation is a public charity supported by many donors while a private foundation is typically funded primarily by one individual, family or corporation. Community foundations also provide centralized administration and may offer donor-advised funds and other charitable fund options.
What is the difference between a community foundation and a donor-advised fund?
A community foundation is a charitable organization. A donor-advised fund is a charitable giving account that may be administered by a community foundation or another qualified charitable sponsor. Community foundations often offer donor-advised funds alongside other types of charitable funds.
Can a community foundation make grants outside its local area?
Depending on the fund and the community foundation’s policies, donors may be able to recommend grants to eligible nonprofit organizations outside the foundation’s home region. The geographic focus refers primarily to the foundation’s community mission and expertise.
What types of funds do community foundations offer?
Common options include donor-advised funds, endowment funds, designated funds, field-of-interest funds, scholarship funds and legacy funds. Available fund types vary by community foundation.
Why use a community foundation instead of a commercial donor-advised fund?
A community foundation may offer local nonprofit knowledge, philanthropic advising, community research, donor education and opportunities for collaborative giving in addition to charitable fund administration.
Can families use a community foundation for multigenerational giving?
Yes. Families can use charitable funds at community foundations to establish giving priorities, involve younger generations in grantmaking and create long-term philanthropic legacies without necessarily establishing a separate private foundation.
How do you start a charitable fund at a community foundation?
The process generally involves identifying your charitable goals, deciding when and what to give, selecting a fund type and completing the foundation’s fund agreement. The community foundation can then administer the fund and help with future charitable activity.
