The coronavirus pandemic can ruin a business overnight. But the Cape Coral Community Foundation continues to thrive because of its strong focus on legacy giving and building long-term, sustainable charitable assets.
You may have wondered why we have “Community Foundation” in our name. Most people are familiar with charitable foundations they have seen in the media – many with recognizable names from the prominent individuals or families who established them. But the community foundation model is less well-known. Essentially, a community foundation is a tax-exempt organization that receives contributions from multiple donors and provides grants and charitable support within a community, focusing primarily on a geographical region.
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Unlike other nonprofits, community foundations are primarily grant-making organizations, not direct service providers. Grants may be awarded to any qualified 501(c)(3) charitable organization for all kinds of purposes. For example, a community foundation might grant money to an existing nonprofit to support current operations, build capacity, purchase capital equipment or furnishings, or establish a new charitable program. Sometimes community foundations will grant money to benefit a specified segment of the community – for instance, giving scholarships to a university to help underserved students.
A unique feature of a community foundation is the ability to house many component funds under a single nonprofit umbrella. Each fund has a separate identity, often in the name of a specific donor, agency, or purpose, yet the cash assets of each fund can be pooled for investment purposes, enabling the foundation to achieve superior diversification and long-term total returns.
WHY GIVE TO A COMMUNITY FOUNDATION?
Donors often prefer to donate to the Cape Coral Community Foundation for several reasons.
• Community foundations are permitted by law to give donors “advisory rights” on grantmaking from a separate fund established by the donor. While the community foundation retains the legal right to accept or deny the grant recommendation, the donor’s wishes are almost always approved. The reason is that a community foundation supports a wide array of 501(c)(3) nonprofit organizations. If the nonprofit is in good standing with the IRS, and there is adequate cash in the fund that the donor established, there is rarely a reason why the donor’s grant request cannot be accepted.
• Donors may make substantial contributions to a fund they establish and then recommend grants from the fund over a short or long period of time. This facilitates large or complex transactions where the donor needs to move quickly, often to ensure that their gift is tax-deductible. For example, if a donor has a substantial amount of appreciated stock they want to donate, and the donor wants to do that in December so that the gift is eligible for a tax deduction, the donor can give the entire amount of appreciated stock to a community foundation, receive a donor gift letter, and then make grant recommendations to other charities over time. A similar timing situation can arise if a donor wants to contribute appreciated real estate or is selling a business and needs a timely tax deduction.
• In some cases, a donor may want to set up a permanent endowment fund. When a community foundation receives a gift for an endowment, the foundation invests the proceeds in a well-diversified balanced pool of investments designed to grow the endowment over time. A portion of the investment earnings from the endowment is then used for grant-making. In this manner, the original corpus (principal) gift is preserved and grows in perpetuity while generating funds for new grants year after year. In contrast, a non-endowment fund may be spent down to $0.
TYPES OF FUNDS
A community foundation will typically have several types of funds, which may be either “endowment” or “non-endowment” funds. Here are a few examples of the funds we offer at the Cape Coral Community Foundation:
• Donor-Advised Funds – As described above, the donor maintains an advisory role on grant-making from this type of fund and can choose to grant money to any number of charitable programs, projects, or organizations.
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• Nonprofit Funds – This type of fund exclusively benefits one or more specific named nonprofit agencies (e.g., Meals on Wheels or Junior Achievement). Nonprofit funds can be established by the agencies themselves or by outside donors and are often used to establish permanent endowments that are safeguarded in perpetuity by the community foundation.
• Field of Interest Funds – A community foundation or donor may establish a fund that provides grants for a stated charitable purpose. In our case, Cape Coral Community Foundation has an Active Adult Center Fund and a Youth Philanthropy Fund, among others. Grants may be awarded to multiple 501(c)(3) organizations that are doing charitable work within those specific fields of interest.
• Scholarship Funds – A donor may establish a scholarship fund to benefit a stated charitable group (often defined by economic hardship). The donor may form an advisory committee of friends or colleagues to determine appropriate scholarship recipients or may delegate that responsibility to community foundation staff. For example, a donor might open a scholarship fund to help residents of limited means acquire job training or go back to college so they can earn income in retirement.
• Discretionary Funds – In some cases a donor leaving a gift from their estate may prefer to specify that the board of a community foundation has discretion in giving grants to the most pressing needs or effective charitable interventions in their community.
Community foundations have the unique privilege of serving as unbiased advocates and leaders within a region’s nonprofit community. While many nonprofit service providers are focused primarily on their specific area of charitable work, community foundations are interested in raising the level of philanthropic giving, advocacy, and capacity for an entire region.
Thus, when a donor gives to a community foundation, they are indirectly benefiting the entire charitable community. Additionally, because of this base of broad charitable interest and involvement, a community foundation’s leadership often has unique insights about specific nonprofit organizations and perspective on where grants may be most effectively deployed.
If you are interested in learning more about how community foundations work, or potentially opening a fund with the Cape Coral Community Foundation, please do not hesitate to contact email@example.com. The Community Foundation is working to ensure residents in Lee County have access to the resources they need to thrive, and we would be grateful for your support.
Michael Chatman is president & CEO of the Cape Coral Community Foundation, the global center for generosity, and can be reached at firstname.lastname@example.org, on Twitter @michaelchatman. The foundation is located at 1405 SE 47th Terrace, Unit 2, Cape Coral. For information, call 239-542-5594 or go to www.capecoralcf.org