Community foundations

“Empower communities to bring about change for themselves”

Overview

Community foundations are independent charities that provide professional and personalised philanthropy advice and grant-making services to clients who are interested in addressing issues of any scale at a local level. A community foundation is like a match-maker and relationship counsellor rolled into one: they help clients identify the organisations which will achieve their objectives and then help to manage the process to ensure these projects deliver the intended results.

Community foundations exist to empower local people to bring about change for themselves, connecting those that have financial resources with those that have the local knowledge, contacts and motivation to make a difference. They manage funds donated by individuals and organisations, create endowments, and act as a vital link between local donors and local needs, enabling clients to achieve far more than they could by themselves.

By March 2007, UK community foundations supported over 12,500 donors and collectively held nearly £200m in endowment.  In the year 2006-07 they made grants of over £75m to more than 18,000 charities and community groups on behalf of a wide range of donors – individuals, families, businesses, charitable trusts and statutory bodies. Community foundations have been active in the UK since the 1980s and have grown rapidly. The network now has 57 foundations across the UK, of which 45 are Quality Accredited .

Each community foundation is unique and develops information on priority local needs – for example, community development, children and young people, health, older people, arts and culture, education or the environment.

For donors

Engaging in community philanthropy can be an especially rewarding experience. There's a sense of satisfaction in empowering local people to bring about change for themselves in an area where the donor often has first-hand knowledge of the issues and a very real sense of what they want to see achieved.

Community foundations are also knowledgeable about the area that they work in and are often in contact with hundreds if not thousands of local charities and community groups. Through their grant-making activity of many years they have built up connections and information which can be invaluable to all types of philanthropists, whether they are just getting started in effective philanthropy, or want to expand their current giving, or don’t know who to support, or simply don’t want the burden of administering their own charitable trust.

Community foundations help clients improve the effectiveness of their giving by differentiating between the hundreds of charities and community groups that compete for their attention. Importantly, they are independent and cause-neutral. Community foundations work with donors, large and small, to make sure their gift makes the most difference. This personalised approach to philanthropy means many different kinds of donors use community foundations to manage their giving.

Benefits include:

• Local understanding and reach: Community foundations connect those with money to dynamic local organisations whose ability to change lives for the better is only inhibited by a lack of money.
• Grant-making expertise: Community foundations are the UK’s leading expert in revitalising local communities through effective charitable giving. They support cutting edge programmes, create new organisations and meet new and emerging needs. They target grants that make a genuine difference to the lives of local people. Comprehensive grant-making policies and due diligence procedures ensure grants are targeted responsibly and carefully.
• Results orientated/maximum impact: Local expertise and in-depth knowledge ensures that money invested makes the lasting difference donors want and expect. Thoughtful grant-making ensures that money goes where it is needed and can have the most value.
• Minimum hassle: The community foundation takes care of time-consuming administration, so that philanthropists can focus on the causes they care about. 
• Flexibility and engagement: Donors are free to set the terms of their fund, and to decide on the level of involvement that suits them. Community foundations support them, if they wish, in meeting and being involved with the people and projects supported by their funds.
• Regular feedback: Clients are kept up-to-date with how their money is being spent, and what recipients have achieved. 
• Cost-effectiveness: Community foundations help donors to give tax efficiently, while keeping administrative costs to a minimum. The costs that all charitable trusts incur are spread over many clients of the foundation.  
• Long-term effectiveness: By setting up an endowed fund, donors and their families can make a real difference to people's lives, now and for years to come.

Community foundations have seen remarkable growth rates in recent years. Actual long-term endowed giving managed has more than doubled since 2002, and will likely see a further boost thanks to the UK Government establishing a new £50m fund. Effective for three years from July 2008 this is designed to give philanthropists an incentive to support small community projects by more than trebling the value of their donations when higher rate tax relief is taken into account.

Next steps

You can find out where the community foundation nearest to you is by going to the Community Foundation Network (CFN) website for contact details and a web link to each UK community foundation. The site also indicates if your local community foundation is Quality Accredited. Community foundation staff will provide personalised advice and information on organisations working locally.

After making contact, donors will be invited to discuss with community foundation staff what they want to achieve, and how their fund should be structured to best achieve the desired results and impact.

Although all arrangements are bespoke, donors have several core options in giving through a community foundation:

• Donations can be pooled in a single, general fund, so that donors can contribute to a wide variety of causes in a specific area.
• Donations can be directed to themed funds, which address issues such as children or older people.
• Donors can establish a separate, tailor-made named fund – the Donor Advised Fund (see below).

Donor advised funds

Community foundations are pioneers of the Donor Advised Fund, which provides many of the same benefits as a private family charitable trust (including all tax reliefs) but allows philanthropists to make use of the community foundation’s grant-making, due diligence, monitoring and reporting processes. Once a fund is established, it is the trustees of the community foundation who take legal responsibility for the fund.

Clients will be guided through a variety of options, reflecting whether they have a lump sum immediately available or whether they plan to build an endowed fund (usually of at least £25,000) over a longer period.
 
Once the fund is up and running, it is up to the client to determine her level of involvement with funding decisions, as the foundation uses its local knowledge to support organisations and projects that have been assessed for their value to the community.

The community foundation will continue to monitor recipients of grants on behalf of donors and keep them informed of their progress. Donors can, if they wish, engage more closely with the causes they care about by giving time and other resources.

Meanwhile, professional investment managers will be applying their expertise to build the value of the fund.

Recommended resources

Established in 1991, Community Foundation Network (CFN) is the national network linking, promoting and supporting almost 60 community foundations in the UK. For more information, or to locate your nearest community foundation, please visit CFN's website.

You also can ask your professional advisor for a referral.

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