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Perhaps the best way to introduce you to the Lincoln Community Foundation is to explain just what a community foundation is. In doing that, it may be helpful to start with the general concept of charitable foundations.
A charitable foundation is a tax-exempt organization that manages a pool of investment assets and periodically distributes portions of the assets or income earned by those assets to various other charitable causes and organizations. Such financial distributions are typically called grants.
While a charitable foundation is technically considered a charity because of its charitable mission and its tax-exempt status, it is generally not an end-user of the charitable funds. It seldom provides direct charitable services; rather, it is a source of funding for other charitable organizations.
Broadly speaking, there are three types of charitable foundations* and they differ from each other in terms of their sources of funds and the focus of their grants.
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- Community foundation. This type of public foundation develops, receives and administers funds from private sources and manages them under community control for charitable purposes primarily focused on local needs. Its grants are normally limited to charitable organizations within a specifically identified region or local community and its charitable giving and other charitable activities are overseen by a board of directors representing the diversity of community interests. It has two major purposes: to seek funds from private sources to build a pool of capital for local philanthropic purposes, and to allocate and distribute such funds for public needs. There are more than 500 community foundations in the United States and the Lincoln Community Foundation is an excellent model for this type of charitable foundation.
- Independent/family foundation. This is the most common type of private foundation. Most, but not all, have endowments and their funds are usually obtained from a single source: individual, family or a corporation. They are, therefore, not dependent on public support and are not active fundraisers or grantseekers. Although the family foundation may operate its own charitable activity or service directly (in house), the bulk of its budget each year usually is applied to grants to other charitable organizations which in turn provide the services or activity to the public. The Ford Foundation and the Kellogg Foundation are two notable examples of private foundations.
- Corporate foundation. This type of private foundation is similar to a family foundation, but the source of funds is a for-profit company. Technically, the corporate foundation is a separate legal entity. Despite the separate legal status, the corporate foundation is very closely tied to the corporation that provides the funding. For the most part, grants made by a company foundation are derived from charitable contributions received from the parent company in the same year. Grantmaking by corporate foundations tends to be in fields related to corporate activities and/or in communities where the corporation operates. The Fannie Mae Foundation and the Pfizer Foundation, Inc. are notable examples of corporate foundations.
*As taken from First Steps in Starting a Foundation by John A. Edie.
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