By: Maura Baron, Senior Consultant

Before I joined the Helen Brown Group, I spent eight years working at a community foundation. I  felt very connected to the community in this role because my work exposed me to a broad range of organizations and donors. One of the most interesting aspects of working at a community foundation is that the staff gets to see all sides of philanthropy: fundraising, grantmaking, and investment.

In this blog post, I wanted to draw on that experience to give you a clearer picture of the role these organizations play, clear up possible misconceptions, and share some practical tips for prospect research.

If You Know One, You Know One

There is a saying in the field: “If you’ve seen one community foundation, you’ve seen one community foundation.” This is because each community foundation is unique. Their size, structure, and mission reflect their donors, partners, and local priorities. Some focus on building permanent endowments, others on cultivating donor relationships, and still others on tackling specific issues in their community.

A Bit of History

Community foundations originated in the early 20th century, primarily to improve the management of charitable trust funds and enable more flexible, locally driven philanthropy. The first community foundation was established in Cleveland in 1914 by Frederick Goff, a banker and retired judge. Goff’s innovation was to pool charitable trust funds historically managed by individual banks into a “community trust,” allowing greater community input and adaptability in grantmaking as needs changed over time. Before the development of community foundations, individuals would leave trusts in their wills to provide for organizations that they supported. The banks that held these trusts were responsible for managing them, but their staff often lacked the necessary philanthropic expertise.

Today, there are more than 900 community foundations across the U.S., collectively managing over $120 billion in assets.

Community foundations also exist in a wide range of countries beyond the US, including Canada, the UK, most of Europe, several countries in Central and Eastern Europe, and Russia. These organizations largely follow the American template: they pool donations from local donors, create endowments, and prioritize grantmaking that reflects community needs. Globally, there are now over 2,000 community foundations working to steward charitable resources and strengthen local impact.

What Community Foundations Do (and DON’T Do)

Community foundations provide varied services to donors and communities including:

• Donor-Advised Funds (DAFs): Allow donors to direct gifts to charities they choose.
• Field-of-Interest Funds: Focus on specific community needs, with foundation staff selecting recipients.
• Designated or Endowed Funds: Provide ongoing, long-term support to organizations chosen by the donor.
• Estate Planning Services: Donors can create funds through estate gifts or designate existing DAFs to continue after their lifetime. They work with foundation staff to establish distribution specifics, enabling easy alteration of charitable estate plans without costly changes to legal documents.
• Variance Power: Variance power is a legal authority that allows community foundations to modify the terms of a charitable fund when its original purpose becomes obsolete, impractical, or impossible. For instance, a fund once set up in NYC to care for working horses was repurposed to broader animal welfare as transportation evolved. Another example is when funds designated to support a local hospital were redirected to address the healthcare needs of the same community after the hospital closed.
• Discretionary Grantmaking: Most community foundations have discretionary funds to support the foundation’s priorities. These funds are overseen by staff who facilitate a competitive grantmaking process with a distribution committee ultimately voting on which organizations receive funding.
• Complex Giving: Community foundations can accept a wide array of complex gifts from donors, including stocks, real estate, limited partnership interests, private business interests, life insurance policies, collectibles, and other assets that smaller charities might be unable to process or liquidate. Foundations possess expertise and infrastructure to manage and convert such assets into charitable impact, often leveraging contacts, legal expertise, and investment managers to unlock the full value and address liquidity challenges.

Beyond managing funds, many community foundations also provide leadership to the local non-profit community, support disaster recovery, lead equity campaigns, and pool discretionary funds to respond to pressing local issues.

What they do not do:

• Community foundations are almost always locally focused, and they rarely use discretionary funds for projects outside their geographic region. However, through DAFs, donors can support verified non-profits without geographic restrictions.
• Community foundations utilize shared governance. Unlike private foundations with central decision-makers, community foundations utilize boards and committees to help oversee funds that the foundation manages.
• Community foundations don’t disclose donor information unless donors choose to be recognized. Many donor-advised funds remain anonymous.

A gift officer friend once asked me why people choose to give to organizations through a donor-advised fund at a community foundation instead of donating directly to the organization?

My answer? Connection. At the community foundation where I worked, the organization built a network of people who genuinely cared about their community and enjoyed being part of that group. Donors viewed the foundation not just as a tool for managing their giving, but also as a meaningful charitable destination. By giving through their DAF, they could support the nonprofits they cared about while also contributing to the broader mission of the community foundation, which knows the ongoing and emerging needs in the community.

Community Foundations vs. For-Profit DAFs

With the growth of commercial DAF sponsors such as Fidelity Charitable, it is important to recognize the differences:

• Local, Personalized Service: Community foundation staff know their local nonprofits and provide hands-on guidance to donors.
• Fee Structure: Administrative fees fund staff and local programs, rather than corporate profits.
• Community Engagement: Community foundations foster relationships, not just between staff and donors, but also among donors themselves. National DAF sponsors rarely provide this personal approach or opportunities for deeper community involvement.

Clearing Up Misconceptions

• Warehouses of Wealth: Community foundations do not just hoard assets; most require fundholders to make regular distributions.
• Transparency Limitations: While DAFs can be anonymous, annual reports and donor stories often reveal valuable information.
• Tools for Ultra-Wealthy: There is a common perception that community foundations serve only high-net-worth individuals. While they do offer services to help wealthy individuals with estate and tax planning, many also offer giving vehicles with much lower entry points.

Prospect Research Tips

For prospect researchers and the organizations they support, community foundations can be sources of major donor identification, community data, and networking opportunities:

• Prospecting: At the core of community foundations are the DAF holders. Community foundation websites and annual reports often identify these donors by their name, their fund name, and areas of interest.
• Board Members: Community foundation board members are often fund holders and major donors. When prospecting in a particular region, be sure to visit the local community foundation website and look at their board members. Their members and affiliations can reveal key funding sources.
• Donor Lists and Reports: Many foundations publish lists of fundholders and annual grant reports. Sometimes a gift given anonymously is celebrated in an annual report providing more information about the gift and possibly the donor. Often fund holder families are featured in annual reports providing valuable background information as well as information about a donor’s motivation to give.
• Discretionary Funds: A community foundation may provide discretionary grants that align with your organization.
• Event Engagement: If your organization is locally focused, many foundation events are open to the public and offer opportunities to meet donors(fund holders) and staff.
• Generational Prospects: A DAF fund may have originated at a local community foundation, and a family member may now live in your organization’s region. These funds are often passed to the next generation, with grantmaking evolving to reflect their interests.
• Identify Relationships: Cultivating relationships with community foundation officers can put your nonprofit on the radar for future grants. Development staff at foundations maintain ongoing relationships with fund holders and are often positioned to inform donors about organizations and programs they may be interested in supporting.

For Further Reading

• DAFinitive: The Helen Brown Group’s searchable database of donor-advised funds (DAFs), sponsoring organizations, fund names, and giving data.
• Council on Foundations: Council on Foundations: The national membership association for U.S. foundations offers information on policies, trends, and practices shaping U.S. community foundations.
• CF Insights Survey Results: The survey’s results reflect the activity of over 600 community foundations of varying sizes, locations, and communities served, located across the country.

Community foundations are an important part of the philanthropic landscape. They serve donors, strengthen nonprofits, and respond to the evolving needs of local communities. For prospect researchers, they can provide both insight and connection. The next time you come across a community foundation in your work, remember that it is not only a valuable institution holding charitable funds, but also a hub of relationships, opportunities, and potential partners for your mission.