Frequently Asked Questions
What is a community foundation?
A community foundation receives contributions from individuals in the community, invests those gifts for long-term growth, and distributes funds back into the areas of greatest need within the community through grantmaking programs.
The mission of every community foundation is to improve quality of life in a local area for the long term. Community foundations follow this mission by harnessing the financial resources of individuals, families, and businesses to support effective community nonprofits.
Community foundations build permanent endowment funds and use part of the annual income to support local nonprofits through grants and special projects. Most community foundation assets are held in separate funds established by local individuals, families, businesses, or charitable institutions. While each fund may have a specific purpose, the foundation’s board of directors or trustees — representing the community — oversees the management of these funds.
How does a community foundation work?
A community foundation is administered by professional staff and is governed by a board of directors or trustees comprised of community leaders. Operating expenses are paid from an annual fund fee and from gifts designated by donors to cover foundation operating and programmatic costs.
Are there other community foundations in Washington State?
All community foundations are independently organized and operated. In Washington State, 28 community foundations are recognized by the Community Foundations National Standards Board. Just as Bainbridge Community Foundation (BCF) serves the Bainbridge community, each community foundation is defined in part by the area it serves.
How do community foundations differ from private foundations?
A community foundation is supported by a broad group of unrelated individuals, families, corporations, and institutions. These donors are united by their ties to the community and the desire to improve quality of life for local citizens. Because of their broad base of support, community foundations are classified by the IRS as publicly supported charities. This gives community foundations tax advantages not enjoyed by private foundations.
Community foundations are also allowed to treat all funds within their control (known as component funds) as part of a single corporation. This gives them administrative and investment advantages over private foundations as well.
Private foundations, by contrast, are generally supported by a single individual, family, or business. Rarely does it make sense to establish a private foundation if the principal endowment is not large. The world’s largest foundations — Gates, Ford, Kellogg — are private foundations. To prevent malfeasance, private foundations are subject to numerous penalty taxes and legal requirements.
How do community foundations differ from other nonprofit organizations?
Most nonprofit organizations have a specific mission. By contrast, a community foundation’s mission is broad: to improve the quality of life in a given area. This breadth of mission reflects our ability to make grants in any field of interest with a charitable benefit to local communities.
This flexibility allows us to serve a wider group of potential donors on the one hand and, on the other, a wider group of nonprofit organizations whom we consider our partners in improving our local community. Area nonprofits benefit from having a local community foundation because the community foundation helps money stay in the community. Community foundations benefit local nonprofits in other ways, too: besides having local grant money available, some nonprofits ask the community foundation to manage an endowment on their own behalf. We call such funds agency endowment funds.
As it grows, a community foundation gradually becomes a center for charitable giving in a community. We help make connections between the people who want to give and the people who need their support.
How can I find out more about community foundations?
The BCF team would love to talk to you about community foundations — at length! Just give us a call. You can also visit the Council on Foundation’s website. We have additional materials in our office that we would be happy to share with you.
How is Bainbridge Community Foundation funded?
Our major source of support comes from contributions of cash, securities, and real property from local individuals, families, businesses, and foundations. Such contributions are often made as simple gifts, but many choose to give through their will or by using a form of planned giving such as a charitable remainder trust. We cover our operating expenses by charging a small annual fee to each fund. BCF does not charge up-front or “pass-through” donation fees.
“Having a Donor Advised Fund at Bainbridge Community Foundation is the best way we know to sustain our Bainbridge Island community. BCF adds value by identifying community needs and local nonprofit solutions. And BCF will outlive us to continue benefiting all the nonprofits that keep this community thriving.”
—Channie and Barry Peters, Bainbridge Community Foundation Fund Advisors