Community foundation

Community foundation
See also
Charitable foundation Bank for International Settlements European regional development fund Taxation principles Statutory meeting Chamber of Commerce Special resolution International acclaim Extraordinary general meeting

Community foundation is a foundation created to serve a specific geographic area or region and employ people that are connected to the community. It became a true phenomenon around the world. “The basic idea was of a gift, made in trust, with a corporate bank as trustee, and with ultimate distribution authority placed in a specially constituted committee.”

History of the community foundations

The community foundations were first opened in the United States in the early 20th century. Back then, the federal income tax has always diversified foundations into public and private ones, where the public foundations were the model preferred. For a charity to become public, it has to either gain widespread donations from public by its thoughtful activities, or it has to be grounded in the public place (i.e. church, museum or university). In other cases, i.e. when the grants are being given out from time to time, or the foundation gets its funds from a single donor, the charity is considered to be private.

Community Foundation has always been considered as a public charity, even though the word “foundation” usually suggests otherwise. However, the fact that it is connecting the “public” as in the community made it possible to become public.

First community foundation, the Cleveland Trust Company, had to face a number of difficulties that came its way. Most significant of them was the fact that after collecting a donation, the funds that were collected had to be used in accordance with donor's will. The only way to go around it was to obtain a court document that allowed the change. However, due to the large amount of time it took for the foundation staff to obtain it, the rules had changed. Since then, the fund-distribution rules have changed – the donors would agree that the purpose of the trust can be changed upon the foundation committee's decision. That way, the foundations can change the purpose of the donor's fund in case the conditions change.

The 20th century was filled with regulation changes in American law that provide community foundations the status they have today. The Treasury Department came up with a set of rules that need to be met for a foundation to be considered an autonomous community foundation. To be considered an autonomy, even now the foundation has to pass a number of “single-entity tests” verified by the Treasury Department. These tests include:

• The “name” test – the organization has to be commonly recognized as a community foundation;
• The “common instrument” test – all funds that belong to the organization have to be subject to the common governing institute;
• The “common governing body” test – The organization has to establish a common governing body that will be responsible for making sure that the funds of the organization will support only charitable purposes;
• The “reporting” test – the organization must prepare a periodic summary of its financial actions.

Activities

The foundations can receive both large donations allowing them to, i.e. build a new library, and also small funds that allow to discuss and plan of opening the shop in a small town that lacks one. Other examples of the foundations activities can be:

• Organizing additional classes for kids that will allow them to develop their skills and talents
• Organizing courses for adults that will widen their prospects
• Developing rural infrastructure or improving the existing ones
• Renovating historical sites
• Renovating schools and universities
• Creating leadership programs (these are especially important, as they help young people understand the importance of the regional foundations)

Differences between community foundations across the world

Each country has specific regulations when it comes to community foundations. However, many of them agree on the fact that community foundation is able to interpret the needs of the locals in a more detailed way (due to it being detached from the national government), is connecting public and private sector of funding (many countries, including USA and Slovakia, consider community foundations to be somewhere in between private and public sector of funding. The final affiliation is decided by the government.

References

• Colinvaux R. (2018). Defending Place-Based Philanthropy by Defining the Community Foundation. "Brigham Young University Law Review", vol. 2018
• Poliak L. (2014). The role of community foundations in local development - Slovak experience. "Theoretical & Applied Economics.", vol. 21
• Richards-Schuster K., Brisson K.G. (2016). Strengthening Youth Leadership in a Metropolitan Region: Examining Lessons From a Multiyear Community Foundation Initiative. "Foundation Review", vol. 8

Author: Olga Muryn