What is a Community Foundation?
What is a community foundation?
A community foundation such as Gary Cares is a tax exempt, non-profit, publicly supported philanthropic organization with the long term goal of building permanent, named funds, for the broad-based public benefit of the residents in the Gary area.
The common mission of every community foundation is to enhance the quality of life in the local area. Community foundations carry out this very broad mission by building permanent endowment funds and using a portion of the annual income to support a variety of local nonprofit organizations through grants and special projects.
Most community foundation assets are held in separate funds established by local individuals, families, businesses, or charitable institutions. Each fund may have a special purpose, but the foundation board of directors, representing the community, oversees them all.
The IRS recognizes community foundations as public charities in part because they receive support from the general public and their boards broadly represent the areas served.
How does a community foundation work?
The workings of a community foundation involve governance by a board of community leaders and administration by staff or, as in the case of Gary Cares, a board of volunteers without salary. To cover the foundation's operating and program costs, such as those from the One Fund Drive, expenses are paid from an annual fund fee and gifts specified by donors.
How do community foundations differ from private foundations?
Community foundations receive support from a diverse group of unrelated individuals, families, corporations, and institutions, all united by a common desire to improve local communities.
Due to their broad base of support, community foundations are classified as publicly-supported charities by the IRS, providing them with tax advantages not available to private foundations.
Moreover, community foundations can treat all funds under their control (referred to as "component funds") as part of a single corporation, granting them administrative and investment benefits compared to private foundations.
On the other hand, private foundations typically receive support from a single individual, family, or business. Establishing a private foundation is usually practical only when the principal endowment is substantial. Some of the world's largest foundations, like Gates, Ford, and Kellogg, remain private foundations.
To ensure transparency and avoid conflicts of interest, private foundations have been subject to IRS penalty taxes and legal requirements since the 1970s.
How do community foundations differ from other nonprofit organizations?
While most nonprofit organizations have specific missions, a community foundation takes on a broader objective - to enhance the overall quality of life in a specific area. This wide-ranging mission enables us to provide grants in any field of interest that benefits local communities.
The flexibility of our approach allows us to attract a diverse range of potential donors and collaborate with a broader spectrum of nonprofit organizations, which we consider as valuable partners in the shared goal of improving local communities.
Local nonprofits benefit significantly from having a community foundation in their area. We assist in keeping financial resources within the community, and some nonprofits entrust us with managing their endowments, known as "agency endowment funds."
As the community foundation grows, it evolves into a central hub for charitable giving in the community. We facilitate connections between those who wish to contribute and those who require support, ensuring a cohesive and impactful approach to serving the needs of our community.
How is the community foundation funded?
The community foundation is primarily funded through generous contributions of cash, securities, and real property from local individuals, families, businesses, and foundations.
Donors may choose to give in various ways, including direct gifts, testamentary gifts through their will, or planned giving methods like charitable remainder trusts.
To cover our operational costs, we apply a small annual fee of 2% to each fund. Additionally, all our board members serve voluntarily, without receiving any compensation.
With the support and dedication of our donors and board members, we ensure that the community foundation remains sustainable and effective in achieving its mission of improving the quality of life in our local area.
How does the Gary area benefit from having a local community foundation?
Enhanced Local Giving: The community foundation encourages and raises the level of local giving within the Gary area. By facilitating contributions from individuals, families, businesses, and foundations, we create a sustainable and reliable source of charitable capital. This pool of funds becomes a valuable and long-term resource to support various community initiatives and projects.
Keeping Charitable Dollars Local: As a community foundation, our focus is on keeping charitable dollars within the local community. By managing and distributing funds locally, we ensure that the impact of these donations directly benefits the residents and addresses the unique needs of the Gary area.
Adapting to Changing Needs: We play a crucial role in ensuring that charitable gifts remain relevant and effective over time. As the community's needs and giving opportunities evolve, the community foundation can adapt its charitable funds to address new challenges and emerging priorities. This adaptability ensures that donations continue to make a meaningful difference in the community, even as circumstances change.
In summary, Gary Cares acts as a catalyst for philanthropy within the Gary area, facilitating local giving and providing a stable and responsive source of support for the community's long-term needs.
What is an endowment?
An endowment is a specific type of fund established to generate income for charitable purposes. In a typical endowment, only the income generated from the fund's investments is distributed, while the principal amount remains untouched.
The primary goal of an endowment is to provide a stable and sustainable source of funding for charitable activities. By preserving the principal and relying on the generated income, an endowment fund has the potential to support charitable causes indefinitely. A common distribution rate from an endowment fund is around 4% to 5% per year.
As long as the endowment's principal is not invaded and the distribution rate aligns with the long-term growth patterns of investments, the endowment fund is likely to remain permanent, ensuring ongoing support for the charitable purposes it serves.
Are all funds with the Community Foundation endowed?
No. Some donors prefer to see a greater percentage of their gift distributed annually. In the case of One Fund Drive, the money goes directly to the designated organization with no funds to Gary Cares other than what is designated directly for us.
What happens to a contribution to the Community Foundation for Gary Cares?
Contributions to the Community Foundation for Gary Cares can have various outcomes, depending on the donor's wishes. Here are the major possibilities:
Unrestricted Gifts: If a donor makes an unrestricted gift, the contribution will be added to and recognized in The Community Fund. The income from this collective fund, built up over time by numerous donors, is distributed annually to support charitable purposes as determined by the board of directors. Unrestricted contributions directly support the competitive grant process.
Field of Interest Gifts: Donors may choose to support a specific area or field of need in the county, such as education, children's health, or arts and culture. These gifts, known as field of interest funds, support the donor's intended areas within the grants program. Contributions of any size are welcome to support these funds, and grant-making decisions are made by the board of directors.
Designated Funds: Donors may restrict their gifts to one or more specific nonprofit organizations, creating designated funds. The community foundation handles these gifts, providing oversight in the annual distribution to the intended organizations.
Donor-Advised Funds: In this scenario, donors establish donor-advised funds and can periodically recommend distributions to specific nonprofit organizations. While the community foundation is not legally bound to follow these recommendations, they generally do so when the intended grantee is a legitimate nonprofit in good standing with the IRS. Donor-advised funds offer flexibility and involvement in philanthropy, making them an attractive alternative to establishing private foundations.
Scholarships: The community foundation operates a scholarship program that allows donors to create new scholarships in memory of loved ones without the complexity and expense of administering each scholarship separately. Donations to support existing scholarship funds, including the general scholarship program, are accepted. Donors interested in establishing new scholarship funds can seek assistance from the community foundation in designing them.
Additionally, the community foundation can be utilized for various other purposes, including short-term gifts, pass-through grants, and anonymous gifts.
What are the tax advantages of donating to a community foundation?
We offer the best tax advantages for charitable donations available under law. We are a publicly-supported non-profit organization, qualified under section 501(c)(3) of the internal revenue code. By avoiding classification as a private foundation, we are able to offer greater tax advantages than does a private foundation.
Who are the current board members?
Please contact Wendy Bennefeld - President, 701-388-6114 or Karie Kirschbaum - Vice President, 218-350-1673 at email@example.com, for any further questions you may have.