What, Exactly, Is a Community Foundation?

In 1915, a Los Angeles businessman named Joseph Sartori had an idea for a revolutionary new way to handle charitable giving in Southern California. Sartori's concept--borrowed from a colleague in Cleveland--was to offer people the ability to set up their own individual private charities under the umbrella of a much larger foundation.

Today, nearly 85 years later, the organization that grew out of Sartori's idea is alive and thriving. The California Community Foundation, headquartered in downtown Los Angeles, is one of more than 550 community foundations that have grown up in every city in the United States. Together, these community foundations today hold charitable endowments totaling more than $26 billion.

A community foundation is a charity that makes grants from funds set up by local residents to help nonprofit organizations and individuals in the community it serves. The community foundation invests the money given by each donor and uses the interest earned on that money to fund its grantmaking programs. In this way, the endowment -- original gifts to the community foundation in the form of cash, stock, property, etc. -- isis never spent, and forms a permanent base from which to grow funds for future programs. The idea is that, since the community will never be without needs, it should never be without funds to meet those needs.

Calling such organizations "community foundations" is no coincidence. Community foundations are experts in both sides of the philanthropic exchange - they know their community of donors, and they know their community's needs.

Funds held by community foundations are set up by individual donors, some wealthy, others of modest means. What donors have in common is a desire to do something good for the community -- whether itt's setting up a scholarship fund to help students in need, saving the environment, funding medical research, supporting a local arts organization, or any other charitable cause the donor chooses. The community foundation helps each "donor advisor" fulfill his or her philanthropic dream by finding organizations that match the donor's interest and that have demonstrated, through the quality of their work, that they are worthy of the donor's gift.

While each community foundation has its own distinct personality and style, all share several attributes:

* Community foundations exist so individuals and families can establish a charitable fund without having to cope with the tax liabilities and administrative hassles of setting up a private foundation.

* Each community foundation functions, in effect, as a philanthropic and grantmaking collective. A unique characteristic of community foundations is that they allow donors to personalize their giving. At the same time, however, a community foundation pools all of its funds to achieve a greater return on investments, making it possible for individual, small funds to make more powerful contributions to a charitable cause than they could on their own. For example, a community foundation might make a single grant for development of low-income housing that includes money from a half-dozen different individual funds focused on the same field.

* Each community foundation is headquartered in and serves a specific locale. Accordingly, a community foundation is a locally managed organization with a fund base reflecting the imperatives of the community itself. But its donors can choose to make grants anywhere they want in the country if they wish.

In short, a community foundation brings the power of endowment funding, its expertise in grantmaking, and the personal quality of an individual's spirit of caring together to benefit others, now and forever.

There are several convenient financial vehicles for setting up a fund at a community foundation which allow donors to minimize estate taxes, provide an income to children and create a permanent charitable legacy, or provide a lifetime income to a donor, and then use the remainder to set up a charitable endowment fund in the donor's name.

There are as many different kinds of funds at a community foundation as there are donors. The personalized service provided to each donor encourages each community foundation to think of itself as not simply a charitable organization, but a philanthropic services corporation. Whatever the charitable interest and financial circumstances, the community foundation helps each donor make a lasting difference.

My organization, the California Community Foundation, makes more than 3,000 grants a year to L.A. charities. It holds assets of $500 million and manages more than 900 individual charitable funds. And it pays out grants at a rate more than double that of the average private or family foundation.

If you live or work in Los Angeles County, call the California Community Foundation at [phone] for more information, or visit us on the Internet at: http://www.calfund.org. Outside of Los Angeles County, a toll-free call to [phone] will be routed automatically to the community foundation that serves the area from which the call was placed.

Jack Shakely has been president of the California Community Foundation for 20 years.