What Is a Community Foundation?

Community foundations are the unsung heroes of every community and region they serve. All around California, thousands of people give time and money to local nonprofits, working to make their communities a better place. If you were making a movie about this good work, these nonprofit staffers, volunteers and donors would play the starring roles. But every story needs a director. Community foundations provide that much-needed leadership role, shaping a region’s story and making sure the actors and the crew know their roles.

A community foundation typically focuses its efforts on a city, county or similar geographic region, serving as a clearinghouse for donations that are then directed to address community needs via local nonprofits. Community foundations offer a menu of grantmaking programs that include donor-advised funds, endowments, scholarships, and other .

Often established through an endowment from an individual or charitable organization, community foundations vary widely in the amount of assets they manage—ranging from less than $100,000 to more than $1.5 billion. Community foundations play a key role in identifying and solving big regional problems, typically supporting activities in fields that include health and human services, the environment, disaster relief, the arts and education.

Donors Make a Real Impact

Community foundations are funded by donations from individuals, family trusts, local businesses and government grants. The typical individual donor is someone who used to give directly to nonprofits, but has decided to be more strategic in their giving. Some donors may want to create a scholarship program in their name or set up assets in an estate giving program.

Community foundations are also attractive to donors who think about their communities holistically instead of focusing on specific issues. More than 700 community foundations in the United States are focused on addressing needs in a select city, county, state or region. They typically support education and human services programs, such as literacy programs, after-school activities, or services for the unhoused.

Impact matters to many new donors, says Kerry Wood, CEO of the Sacramento Region Community Foundation. 

“We’ve had some people come to us who have been giving a smaller amount to many organizations, and we have been able to educate them on making a real impact with fewer nonprofits,” Wood says. “We work with regional philanthropists who want to be strategic in their giving and we have a variety of ways we can help them. We work with them to put the money into the community. 

“The beauty of the donor experience is that there isn’t one typical scenario with a community foundation.”

According to Fidelity Charitable, a community foundation’s grantmaking programs are supported both by donations designated for immediate distribution and by income from the foundation’s endowed funds, which are invested for long-term growth. Typically, such funds include:

• Designated funds—Used to support one or more specific designated charities in the region.
• Field of interest funds—Used for particular issues, such as the environment or health care.
• Scholarship funds—Used to support the education of students who meet certain criteria.
• Unrestricted funds—Used to meet a community’s unexpected needs, such as opioid addiction or natural disaster relief.

Many community foundations also offer donor-advised funds, one of the easiest and most popular ways today for donors to make a charitable impact and receive a significant tax advantages. A donor-advised fund is like a dedicated account for charitable giving—sponsored by a public charity—that enables donors to contribute to the fund, be eligible for an immediate tax deduction, and recommend grants to any IRS-qualified charity.

The Sacramento Region Community Foundation is also able to play an important role in putting a spotlight on the many nonprofits that gain exposure from their efforts. One marquee example is the annual Big Day of Giving event, a 24-hour giving challenge that encourages unrestricted support for the community’s many nonprofits. In 2022, the Sacramento-based foundation’s Big Day of Giving raised a record $13.4 million for participating nonprofits, and $78 million has been raised since its first giving day in 2013.

“We have every type of media that supports this event with extensive coverage that most of these nonprofits couldn’t get on their own,” Wood says. “We have about 700 nonprofits involved and they are out promoting it. It introduces people to philanthropy that might think it's out of their reach, and it allows us to open a conversation about what we do and how they can have impact.” 

Positive Network Effect

Nonprofits that partner with their local community foundation also benefit from the professional development opportunities and networking connections that the foundation provides, leading to stronger boards, better leaders, stronger communications and better outcomes, Wood says. 

“When we are working toward a specific area of focus, we partner with all the appropriate nonprofits,” Woods explains, adding, “We often hear how valuable this support is.”

Community foundations can look holistically at their communities and take a longer-term approach to tackling issues, something most nonprofits can’t do, Wood said. The Sacramento Region Community Foundation, for instance, took the time when Wood came on board as CEO to examine its programmatic strategies and how they might change in response to new needs in the community.

“There are so many pressing needs, and we will take a year to explore directions that we want to take as a foundation,” Wood says. “When we hone in on the focus areas, when a donor comes to us, these are the ways we support the community. They put their trust in knowing that we’ve taken the time to set the right direction.” 

Community foundations are a good first stop for a potential new donor when exploring funding options, Wood says, because they can tailor a program for them or point them in the right direction if they’d rather support a nonprofit directly. “It should be the first place they go. It doesn't mean it’s going to be the right fit for them, but we are an excellent resource for anyone who’s exploring giving and how to be strategic about it. We’d love to be the first place they call.”

If you’re interested in exploring philanthropy through a community foundation, this national database will provide information on a community foundation in your hometown or another area you care about.