Standards and Effective Practices for Community Foundations
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I. Definition of a U.S. Community Foundation
  A. A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported, non-sectarian philanthropic institution with a long term goal of building permanent, named component funds established by many separate donors for the broad-based charitable benefit of the residents of a defined geographic area, typically no larger than a state. Underlying Rationale: Defines a community foundation.
   
Methodologies
New methodology: (Describe Below)
  Description:
 
II. Mission, Structure and Governance
  A. A community foundation is founded and operated for public benefit and has a well-defined, articulate mission. Underlying Rationale: As an exempt charitable organization, the community foundation is required to operate for the benefit of the general public rather than private individuals or shareholders. A well- articulated mission statement specifically defines and communicates to the public the purposes of serving the community.
   
Methodologies
mission statement
Plans and processes for communicating the mission
Process for developing/revising mission statement
Use of mission statement in planning and Board meetings
New methodology: (Describe Below)
  Description:
 
  B. A community foundation is recognized by the Internal Revenue Service (IRS) as tax-exempt under Internal Revenue Code Section 501 (c) (3) organized and operated exclusively for charitable purposes. Underlying Rationale: Internal Revenue Service recognition provides assurance to the public that the community foundation operates solely for charitable purposes and that their contributions to the community foundation are not taxed
   
Methodologies
Process for meeting all IRS requirements
New methodology: (Describe Below)
  Description:
 
  C. A community foundation meets the public support test set forth in Internal Revenue Code Section 170(b)(1)(A)(vi) as modified by Treasury Regulation Section 170A-9(e)(10). Underlying Rationale: In order for donors to enjoy the most beneficial tax treatment for their contributions, the community foundation must receive a certain portion of its annual support from multiple individuals and organizations. Meeting this "public support test" is a clear demonstration that the community foundation enjoys broad public acceptance and support and is not controlled by a small group of donors. Building a strong endowment and administering a collection of funds are fundamental aspects of being a community foundation. Satisfaction of the public support test under section 170(b)(1)(A)(vi) shows that donor support is from gifts rather than program revenue. This classification also allows the community foundation to maximize the amount of investment income it can earn without jeopardizing its exempt status.
   
Methodologies
Regulatory compliance procedures
New methodology: (Describe Below)
  Description:
 
  D. A community foundation has an independent governing body broadly representative of the community it serves. Underlying Rationale: A community foundation whose governing board is broadly representative of its community enjoys widespread trust and confidence, provides accountability to the citizens of that community, and ensures that all segments of the community feel they have equal access to the Foundation.
   
Methodologies
Appointing authority process
Develop board characteristics matrix
Recommending authority process
New methodology: (Describe Below)
  Description:
 
  E. A community foundation’s governing body retains variance power by which it may modify any restriction or condition on the distribution, if circumstances warrant. Underlying Rationale:

Retaining and exercising the variance power insures that the donors’ interest in the community is efficiently executed and continues to remain relevant to that community’s changing needs and opportunities. As well, the variance power is consistent with Internal Revenue Services regulations.
   
Methodologies
Marketing materials and donor communications
Use of the variance power
New methodology: (Describe Below)
  Description:
 
  F. A community foundation serves a particular geographic area such as a municipality, county, state, metropolitan area or closely related aggregation of such areas that are considered for some purposes as a community, typically no larger than one state. An organization serving a single greater metropolitan area would satisfy this criterion even if that greater metropolitan area included parts of several states. This criterion excludes national and multi-national organizations. Underlying Rationale:

Geography is an important element in defining the community that a community foundation serves. It often determines a community foundation’s name, and suggests to whom it “belongs.” Yet it is the experience of people within that defined geography that ultimately determines their sense of ownership and connectedness with the foundation, be they potential donors or grantees or volunteers.
   
Methodologies
Area Affiliates
Area targeted grantmaking
Marketing
mission statement
Regional governance structure
Regional service structure
Transition from several independent community foundations to a regional governance structure
New methodology: (Describe Below)
  Description:
 
  G.01 A community foundation's governing body is responsible for the mission, direction and policies of the organization. Underlying Rationale: Recognizes that the governing body is ultimately responsible for the on-going planning, oversight and evaluation of the community foundation.
   
Methodologies
Board education and training
Board evaluation of progress meeting strategic goals
Board job description and expectations
Board manual/orientation/training
Board retreat process
Board self-assessment
mission statement
Strategic planning
New methodology: (Describe Below)
  Description:
 
  G.02 A community foundation’s governing body ensures adequate human and financial resources and actively monitors and evaluates the organization’s chief executive officer. Underlying Rationale: An adequate supply and the effective deployment of resources, including the CEO’s time and priorities, are essential to properly serving the community.
   
Methodologies
Annual budget development on both a functional and lines of business basis
CEO job description
Executive compensation and performance review
executive job description
Organizational planning practices
Periodic Cost/revenue analysis of service areas (sometimes referred to as “Lines Of Business” or LOB)
New methodology: (Describe Below)
  Description:
 
  G.03 A community foundation's governing body approves policies to prevent perceived, potential or actual conflicts of interest. Underlying Rationale: Beyond mere compliance with state rules governing conflicts of interest, as an institution predicated on public trust and accountability, the community foundation must avoid not only impropriety, but also the appearance of impropriety. Proper policies and procedures governing conflicts not only assure legal compliance, but also enhance the reputation of the organization as one dedicated to fair-minded and ethical behavior.
   
Methodologies
Affiliation disclosure process
Conflict of interest policy
Conflict policies for special situations such as affiliate boards, loan programs and scholarship programs
Scholarship Notification and Certification Process
New methodology: (Describe Below)
  Description:
 
  G.04 A community foundation's governing body serves without compensation (exclusive of the chief executive officer). Underlying Rationale: Draft rationale: Although legal, board compensation, regardless of how minimal, reduces the amount of money available for other philanthropic uses and can result in negative perceptions by the public about the board’s stewardship of charitable funds.
   
Methodologies
Board bylaws or charter
Policies for board members as vendors
Policies for expenses reimbursement
New methodology: (Describe Below)
  Description:
 
  G.05 A community foundation's governing body is not controlled by an other nonprofit organization, or by any single family, business or governmental entity or any narrow group within the community. Underlying Rationale: Assurance that the governing body represents the community broadly and is not unduly influenced by any group or individual and is acting only for the benefit of the community.
   
Methodologies
Board bylaws and nominating committee/election process
Board term limits
Diversification of the donor base
New methodology: (Describe Below)
  Description:
 
  G.06 A community foundation's governing body reviews and adopts an annual operating budget. Underlying Rationale: A core demonstration of the governing board’s responsibility to operate efficiently and effectively according to its mission and exercise proper stewardship of the funds placed in its care. State law imposes a duty of care upon each and every board member that holds him or her personally responsible for ensuring proper stewardship over foundation resources.
   
Methodologies
Board charter and reference to the role of budget approval
Budget process
Committee charters
New methodology: (Describe Below)
  Description:
 
  G.07 A community foundation's governing body ensures that the governing documents include policies for size of the board, required number of meetings annually, limits of members' terms, and structure and responsibilities of standing committees. Underlying Rationale: Assurance that the governing body is organized to properly and effectively exercise its responsibilities to the community and is regularly checking these policies to insure that the Foundation has fresh perspective and is relevant and serving current and future community needs.
   
Methodologies
Board procedures manual
Process for changing the size of the board
New methodology: (Describe Below)
  Description:
 
  G.08 A community foundation’s governing body ensures that the community foundation reflects the diversity of the community it serves Underlying Rationale: A community foundation whose staff and volunteers reflect the broad range of perspectives and experiences resident in its community is substantially more able to serve that community well and will help ensure that all aspects of the foundation will be accessible to all.
   
Methodologies
Adoption of equity and diversity policy
Demographically targeted funds
Hiring and volunteer recruitment
Request information on equity and diversity from grant applicants
Vendor selection
New methodology: (Describe Below)
  Description:
 
  G.09 A community foundation's governing body ensures that the community foundation meets all laws and legal requirements. Underlying Rationale: Protects the community foundation and the community’s interest in it from the occurrence of improper conduct and protects its tax exempt status and assets. Among the duties imposed under state law, the duty of obedience holds directors responsible for ensuring that the community foundation is in compliance with applicable law.
   
Methodologies
Keeping current on legal requirements
New methodology: (Describe Below)
  Description:
 
  G.10 A community foundation's governing body approves all grants. Underlying Rationale: Draft rationale: Approval of grants and not approving grant requests is a core demonstration of the exercise of proper stewardship of the funds placed in its care and responsiveness to community needs in carrying out the foundation’s mission.
   
Methodologies
Board approval of donor advised grants
Emergency grants
New methodology: (Describe Below)
  Description:
 
III. Resource Development
  A. A community foundation has, or works to develop, broad support in the form of contributions from many, separate, unrelated donors with diverse charitable interests in the community served by the community foundation. Underlying Rationale: Helps the community foundation represent the wide spectrum of its community’s philanthropic interests, attract a broad range of donors and broaden the range of program areas it may pursue and grants it may fund.
   
Methodologies
Donor Education Program
Donor Education Program
marketing materials
marketing materials
Outreach to HNW indviduals
Special Interest Funds
New methodology: (Describe Below)
  Description:
 
  B. Contributions to a community foundation represent irrevocable gifts subject to the legal and fiduciary control of the community foundation's governing body. Underlying Rationale: Strengthens the community foundation’s ability to respond to the long term and future needs of its community. Required by various sections of the tax code and regulations, including enabling funds to be included as component funds of the community foundation, allowing gifts to be counted towards public support and enabling donors to claim a deduction for their contributions.
   
Methodologies
fund agreements
fund agreements
New methodology: (Describe Below)
  Description:
 
  C. A community foundation has a long-term goal of securing resources to address the changing needs of the community it serves. Underlying Rationale: Having flexible and permanent funds provides a community with the capability to address evolving and unanticipated future needs and opportunities.
   
Methodologies
Marketing flexible funds
Matching donor interest with local community needs
mission statement
New methodology: (Describe Below)
  Description:
 
  D. A community foundation accepts and administers a diversity of gift and fund types to meet the varied philanthropic objectives of donors. Underlying Rationale: Attracts donors and additional gifts that may not otherwise come to the community foundation and which represent all aspects of the community. Ensures that the foundation is well positioned to meet not only the current needs of its donors, but also the long term needs of the community.
   
Methodologies
Agency endowments
Fulfilling donor intent
Gift acceptance policy
gift/fund acceptance policies
gift/fund acceptance policies
gift/fund acceptance policy
gift/fund acceptance policy
gift/fund acceptance policy
marketing materials
marketing materials
marketing materials
New methodology: (Describe Below)
  Description:
 
  E. A community foundation adopts gift and fund acceptance policies that address minimum fund size, types of fund options, types of gift mechanisms, and policies and procedures for accepting various types of assets, and makes these policies available upon request. Underlying Rationale: Complete and consistent policies and procedures for accepting gifts promotes accountability to the donors and the community, and protects the integrity of the community foundation.
   
Methodologies
Gift and fund acceptance policies
New methodology: (Describe Below)
  Description:
 
  F. During the gift planning process, the role and relationships of all parties involved are fully disclosed to the donor. Underlying Rationale: Timely and full disclosure of any and all benefits that may accrue to involved parties insures the confidence donors place in a community foundation and protects the donors’ and the community’s interest.
   
Methodologies
Disclosure statement
Practices employed by national programs with financial services companies
New methodology: (Describe Below)
  Description:
 
IV. Stewardship and Accountability
  A. A community foundation is a steward of charitable funds, investing and prudently managing funds and maintaining accurate financial records. Underlying Rationale:

Confidence that funds placed in a community foundation will be responsibly managed is central to a donor’s decision to do so.
   
Methodologies
Audit and audit committee charter
Communications with the public concerning financial condition and investment performance
Investment performance, review, and investment committee
Socially responsible investment policies
New methodology: (Describe Below)
  Description:
 
  B. A community foundation is accountable to the community it serves and regularly disseminates information on its programs and finances. Underlying Rationale: Promotes community awareness of, appreciation for, and trust in the community foundation, provides accessibility to the broad community and insures public accountability by communicating widely and frequently, thereby serving diverse donors and grant-seekers.
   
Methodologies
Investment briefings
Providing a sample press release
Public availability of 990
New methodology: (Describe Below)
  Description:
 
  C. A community foundation maintains a written record of the terms and conditions of each component fund and all such records must reference the variance power. Underlying Rationale: Careful documentation of the terms and conditions under which a fund was created is essential so that the community foundation can ensure those funds are used in a manner that is consistent with the donor’s intent. At the same time, the variance power (the power to modify or remove a donor restriction under certain circumstances) gives the community foundation the flexibility it needs to ensure that those funds are available to serve the long-term interests of the community. Beyond simply providing flexibility, the variance power is also required under the community trust rules in order for a fund to be considered a component part of the community foundation rather than a separate private foundation. Finally, the variance power is necessary under financial accounting rules in order for assets to be considered unrestricted. Under these rules, it is essential that the variance power be granted to the community foundation not only in the governing documents, but also in the fund agreement.
   
Methodologies
Amending fund agreements
Fund agreements
Sample donor advised fund agreement
New methodology: (Describe Below)
  Description:
 
  D. A community foundation honors the charitable intentions of the donors consistent with community needs and applicable laws and regulations. Underlying Rationale: Confidence that a community foundation will honor donors’ charitable intentions is central to donors choosing a community foundation for their philanthropy.
   
Methodologies
ensuring donor intent
Fund management procedures
New methodology: (Describe Below)
  Description:
 
  E. A community foundation observes the balance between donor involvement and governing board control and complies with applicable laws and regulations. Underlying Rationale:

A clear delineation of the balance of donor involvement and governing board control is essential to protecting the interests of the donor and meeting the requirements of applicable laws and regulations.
   
Methodologies
Donor advised fund guidelines, policies and procedures
donor advised fund guidelines, policies and procedures
fund agreements
fund agreements
Procedures for fund investment oversight
New methodology: (Describe Below)
  Description:
 
  F. A community foundation ensures that the foundation's financial resources are used solely in furtherance of its mission. Underlying Rationale: Policies and practices are clearly communicated and implemented about the use of funds which demonstrate to, and insure the community about the exercise of proper stewardship of the funds placed in its care.
   
Methodologies
Compensation plans
Internal control policies
New methodology: (Describe Below)
  Description:
 
  G. An annual audit (financial review when assets total less than $1 million) is performed by an independent public accountant, reviewed and accepted by the governing body and made available to the public upon request. Underlying Rationale: Confirms to the governing board and the community that proper stewardship of the funds placed in its care is being exercised and that funds are being used as the donor intended and to benefit the community.
   
Methodologies
public availability of most recent audit
New methodology: (Describe Below)
  Description:
 
  H.01

A community foundation has investment policies that include asset allocation guidelines, a spending policy and criteria for measuring investment policies

Underlying Rationale: The effective execution of its stewardship responsibility is at the core of the trust and confidence a community will have in its community foundation. Prudent management of donors' contributions ensures donors' objectives and advances community quality of life.
   
Methodologies
Board/committee investment oversight
Different policies for different fund types – such as endowed, non-endowed, advised funds, etc.
Investment policy - Comprehensive
Investment policy specifying risk tolerance, asset classes and qualifications, and asset allocation
spending & investment policy
New methodology: (Describe Below)
  Description:
 
  H.02 A community foundation makes available to the public upon request the names of its investment managers, fees charged (including investment and administrative fees), governing body or appointees responsible for investment oversight and investment. Underlying Rationale: Assures transparent policies that engender trust and confidence in the community foundation, provides public accountability, and attracts donors.
   
Methodologies
marketing materials
Posting investment returns
New methodology: (Describe Below)
  Description:
 
V. Grantmaking and Community Leadership
  A. A community foundation operates a broad grants program to multiple grantees that is limited neither by a single focus or cause or exclusively to the interests of a particular constituency. Underlying Rationale: Insures the community foundation is knowledgeable about, and supports, the broad charitable needs of the community, attracts donors representing the full spectrum of philanthropic interest and encourages them to convey broad discretionary powers with their gifts to the community foundation.
   
Methodologies
Grant review process
grantmaking
Strategic Plan for Grantmaking
New methodology: (Describe Below)
  Description:
 
  B. A community foundation awards some grants from its discretionary resources through open, competitive processes that address the changing needs of the community. Underlying Rationale: Insures accessibility for a broad range of community organizations, serves as an effective vehicle for learning about new and emerging community needs and opportunities, and attracts donors representing a wide range of philanthropic interests.
   
Methodologies
grantmaking
Unrestricted fund grantmaking
Use of technology
New methodology: (Describe Below)
  Description:
 
  C. A community foundation widely disseminates grant guidelines to ensure the fullest possible participation from the community it serves. Underlying Rationale: Assures the spectrum of community grant seekers have access to the community foundation, provides the foundation with knowledge about the community’s new and emerging challenges and opportunities and provides encouragement to donors to convey broad discretionary powers with their gifts to the community foundation.
   
Methodologies
grantmaking
Technical assistance
New methodology: (Describe Below)
  Description:
 
  D. A community foundation performs due diligence to ensure that grants will be used for charitable purposes. Underlying Rationale: Compliance with Internal Revenue Service regulations. As well, donors and the community consider a grant from a community foundation as assurance of the integrity of the grant recipient.
   
Methodologies
Due diligence procedure
Grant evaluation procedures
New methodology: (Describe Below)
  Description:
 
  E. A community foundation works to identify community issues and opportunities and acts as a leader and convener, using its human and/or financial resources to address immediate and long term community issues and opportunities. Underlying Rationale: As a vital resource where many points of view can come together to address the wide range of community quality of life issues, a community foundation is positioned with a unique perspective. It has the advantages of ”seeing” the big picture, and possessing a broad, and often comprehensive, range of relationships and partnerships with the community’s key players. These position the foundation for effective leadership on broader-scale problems and opportunities, both short- and long-term.
   
Methodologies
community leadership
community leadership
Convenor, Community, Issue Expert
Convenor, Grantmaker, Educator
Educator
Educator, Grantmaker, Community, Philanthropy, Issue Expert
Grantmaker
Trusted Steward
New methodology: (Describe Below)
  Description:
 
VI. Donor Relations
  A. A community foundation informs and educates donors about community issues and grantmaking opportunities. Underlying Rationale: Supports compliance with Internal Revenue Service regulations. As well, community knowledge is one of the special attributes donors most value in community foundations. The more donors become aware of issues and needs, as well as successful practices, methods, and organizations, the more effective and satisfying their philanthropy.
   
Methodologies
Briefings on Areas of Community Need
Community Site Visits
Customized Information Services
donor education/participation
Donor Survey
evidence of donor education
Family Philanthropy Meetings
Fundamentals of Philanthropy Workshops
Giving Circles and Venture Philanthropy
Newsletters/Bulletins
Philanthropic Resources Directory –
New methodology: (Describe Below)
  Description:
 
  B. A community foundation actively involves donors in identifying and responding to community issues and opportunities. Underlying Rationale: Engaging donors in identifying and responding to community issues and opportunities is one of the most valuable services a community foundation is able to provide to its community. The more donors are engaged, the more effective and satisfying their grantmaking.
   
Methodologies
Community education and donor briefings
Determining and recording donor intentions
donor education/participation
donor education/participation
Donor participation in foundation and community meetings
Grantmaking programs or program initiatives supported by donors
Practices that help community foundations determine and/or track donor interests
New methodology: (Describe Below)
  Description:
 
  C. A community foundation promptly and accurately acknowledges gifts. Underlying Rationale: Acknowledges the importance of the donor’s generosity. Enhances donor confidence in the community foundation by demonstrating proper stewardship of the funds placed in its care and proper accountability to the public.
   
Methodologies
Gift acknowledgement processes
New methodology: (Describe Below)
  Description:
 
  D. A community foundation provides fund statements, at least annually, to those donors who wish to receive them. Underlying Rationale: Keeps donors informed, rekindles their interest in the community foundation and encourages repeat gifts.
   
Methodologies
Fund statements
Survey to Donors
New methodology: (Describe Below)
  Description:
 
  E. All private information obtained with respect to donors and prospects is kept confidential to the fullest extent possible. Underlying Rationale: Assures the trust and confidence donors place in the community foundation. Ensures compliance with laws protecting the nonpublic personal information of donors where such laws apply to community foundations.
   
Methodologies
Confidentiality processes and procedures
New methodology: (Describe Below)
  Description:
 
VII. Communications
  A. A community foundation communicates openly and welcomes public scrutiny. Underlying Rationale: Demonstrates proper public accountability and engenders community trust and confidence in the community foundation and provokes the exercise of policies and practices to deserve that trust and confidence.
   
Methodologies
Communications audit
Mailing lists
New methodology: (Describe Below)
  Description:
 
  B. A community foundation has a communication strategy that includes a report, widely distributed at least annually, which describes the community foundation's mission, activities and financial operations. Underlying Rationale: Promotes community awareness of and appreciation for the community foundation, provides public accountability, and attracts donors and grant-seekers.
   
Methodologies
Communications Committee
Communications plan
Crisis plan
Style book/guidelines
Web-based Annual Report
New methodology: (Describe Below)
  Description:
 


The above materials are for educational purposes only. They are not standard or model forms and should only be used as a reference in developing your own documents with advice from legal counsel where appropriate. Please read the full Terms of Use for more information.

Please note that these materials were collected prior to the passage of the Pension Protection Act of 2006 so do not necessarily reflect the recent changes in the law. As always, these documents should only be used as a reference in developing your own documents with advice from legal counsel where appropriate. For more information on the Pension Protection Act of 2006, see www.cof.org/hr4.
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