How a community foundation works

Every community foundation starts with enthusiasm for this type of organization and with individual citizens eager to put the idea to work. But what is the best way to go about it? Legal procedures aside, there are many ways to found a community foundation. It can happen on the initiative of a sole founder, or by many citizens working together.

There is no one right way to establish a community foundation, no patented formula for success. Each community foundation is an individual institution arising from the specific conditions in its local or regional environment. In particular, the concept of a community foundation is very flexible in terms of its actual structure, and indeed demands adaptation to suit a city or region's particular situation. Just how well these foundations can do their work thus depends in large part on the local setting. But although conditions differ from place to place, a few experiences are generally applicable everywhere.

Area of activity
As many examples in small and midsized towns have shown, initiating a community foundation is not necessarily tied to a geographic area or population of a specific size. However, the area covered should ensure enough potential for long-term asset growth. It might therefore make sense for several towns to band together and found a community foundation as a group. Working closely together brings synergies that benefit everyone involved.

Support activities
A community foundation can function as a grantmaking and/or operating foundation to achieve its objectives. In consideration of its limited financial resources in the early phases, it should strategically plan its grantmaking and project activities. But first it needs to identify local problems and seek possible solutions. As a rule, a community foundation then tries to find grantworthy organizations or initiatives and support their projects and work. Initiating and carrying out its own projects can help a foundation further define its profile and develop innovative models and solutions. But at the same time, it should not compete with existing organizations.

Funding
In principle, a community foundation funds its activities with returns on its capital. To do so, however, the foundation must have an endowment of millions. This makes financial donations and gifts in kind particularly important in the start-up phase.

Building assets
One of a foundation's most important tasks and goals is building the organization's assets. For this, a community foundation depends upon endowment contributions. To attract this funding, the foundation needs to inform potential donors about its work, win their trust and support them in pursuing their philanthropic interests. This requires sufficient human resources to get the job done.

Administrative costs
One key problem facing every community foundation in the start-up phase is ongoing administrative costs; the group needs to hire full-time employees. This issue makes it essential for the foundation to convince potential donors and philanthropists of the need for means to run the organization itself. Establishing and operating an office and providing a host of services for the philanthropists is next to impossible without full-time personnel over the medium and long term. Furthermore, findings in the United States and Canada have shown that community foundations that hired full-time help early on generally increased their assets faster.

The Initiative Bürgerstiftungen (Community Foundations Initiative) in Berlin offers consulting on issues relating to community foundations. Please visit http://www.buergerstiftungen.de