Pros and Cons of Donating to Community Foundations

What are Community Foundations? 

Community foundations are public charities that work within a specified geographic area to improve the lives of residents, usually through grantmaking to other, smaller organizations in the area. Community foundations come in all sizes, often corresponding to the scope of the area they serve. They serve as central hubs, bringing together local stakeholders to identify and solve problems in the communities they serve.

The Advantages of Community Foundations

Community foundations are permanent fixtures in local landscapes. They are embedded in communities and are, therefore, perfectly positioned to understand the community's challenges and the resources they have to address those challenges. Community foundations have deep relationships with local charities, businesses, leaders, and individuals within the community. Those relationships help the foundation identify and solve problems in ways that outsiders, or even individuals in the community, cannot. Community foundations can quickly respond sensitively to the existing conditions on the ground. 

Potential Downsides of Community Foundations

Community foundations are not all created equal. At their best, community foundations reflect those they aim to serve. However, some community foundations are led by individuals who represent only some of the population - usually along existing lines of wealth and privilege. These community foundations may not adequately incorporate the knowledge and input of marginalized communities best positioned to understand and address the problems that disproportionately impact them. 

The Timeline of Community Foundation Work 

Because community foundations are intended to exist in perpetuity to support local needs as they change and develop over time, money donated to community foundations may not be spent immediately. This can be an advantage or a disadvantage depending on a donor’s perspective. For donors who want to make an impact now with their giving, this is a distinct downside. But there are benefits to keeping money in reserve for later use. For example, in the wake of a natural disaster donations tend to pour into the impacted areas. This influx of money often dries up just as quickly as it began, but natural disasters create lasting challenges that require years of work to address. This is where the long-term funds collected by community foundations can come in. Community foundations can collect money during the initial wave of donations, then disperse it over the course of years, long after donors have forgotten the disaster. 

Community foundations usually maintain endowments so that they can address the needs of communities as they arise, but if your priority is to immediately disperse funds into the community, they may not be the right fit for you. There can be workarounds to this problem within community foundations. Some foundations set up emergency funds that are intended for immediate distribution. You can read the description of funds to learn how the money will be spent and on what timeline to make an informed choice. If you feel a community foundation is not the right fit for your donation, you can still benefit from the expertise housed within a community foundation to your advantage. By giving directly to one of the grantees of a community foundation, you can expedite the flow of money to the nonprofit while giving to a trusted source. A Charity Navigator search can help you verify a charity before you give or help you find an organization in the area you want to support directly.

Choosing a Community Foundation to Support

Use Charity Navigator and The National Standards for U.S. Community Foundations Accreditation Program to vet community foundations. Charity Navigator’s Community & Culture beacon includes two areas of assessment: constituent feedback and equity practices. Constituent feedback practices identify how well an organization reflects and engages with the local community. Donors interested in supporting a community foundation without a Charity Navigator rating should compare local demographic data to public information about the foundation's leadership. Donors can also explore online to learn more about public perception of the community foundation, particularly the opinions of marginalized groups in that area.