GRAYS HARBOR COMMUNITY FOUNDATION

FREQUENTLY ASKED QUESTIONS

We hope you find this section useful.  Please contact us if you have further questions.

QUESTIONS

Community Foundations:  Defined and Compared

• What is a community foundation?  {Answer}

• How does a community foundation work?  {Answer}

• Are there other community foundations in Washington?  {Answer}

• How do community foundations differ from private foundations?  {Answer}

• How do community foundations differ from other nonprofit organizations?  {Answer}

• How do community foundations differ from the United Way?  {Answer}

• What are the alternatives to using a community foundation?   {Answer}

• How can I find out more about community foundations?   {Answer}

Grays Harbor Community Foundation

• What is the Grays Harbor Community Foundation?  {Answer}

• What are the goals and mission of the Grays Harbor Community Foundation?  {Answer}

• How is the community foundation funded?  {Answer}

• What is the history of the Grays Harbor Community Foundation?  {Answer}

• How does Grays Harbor County benefit from having a local community foundation?  {Answer}

Financial

• What is an endowment?  {Answer}

• What happens to a contribution to the Grays Harbor Community Foundation?  {Answer}

• How does a community foundation invest its funds?  {Answer}

• What are the tax advantages of donating to a community foundation?  {Answer}

People

• Who are the current board members?  {Answer}

• How are board members chosen?  {Answer}

• How is the Grays Harbor Community Foundation staffed?  {Answer}

Grants

• How can an organization apply for a grant from the Grays Harbor Community Foundation?  {Answer}

• How does the community foundation select grant recipients?  {Answer}

• What are the potential sources of funding for a grant application?  {Answer}

• What size grants are reasonably likely?  {Answer}

Scholarships

• How can an individual apply for a scholarship from the Grays Harbor Community Foundation?  {Answer}

• How are scholarship recipients chosen?  {Answer}

ANSWERS

What is a community foundation? 

A community foundation is a tax exempt, non-profit, publicly supported, philanthropic institution with the long term goal of building permanent, named funds for the broad-based charitable benefit of the residents in a given area. 

The common mission of every community foundation is to enhance the quality of life in the local area.  Community foundations carry out this very broad mission by building a permanent endowment fund and using the annual income to support a variety of local nonprofit organizations through grants and special projects. 

Most community foundation assets are held in separate funds established by local individuals, families, businesses, or charitable institutions.  Each fund may have a special purpose, but the foundation board of directors, representing the community, oversees them all.  The IRS recognizes community foundations as public charities in part because they receive support from the general public and their boards broadly represent the areas served. 

For a more detailed answer to this question, please click here.

{Back to Questions}

How does a community foundation work? 

A community foundation is governed by a board of directors of community leaders and is administered by professional staff.  Operating expenses are paid from management fees, through grants and partnerships with local foundations, and from gifts designated by donors to cover foundation operating costs.

To read more specifically how our foundation works, click here.

{Back to Questions}

Are there other community foundations in Washington State? 

There are community foundations in Seattle, Spokane, Tacoma, Olympia, Bellingham, Everett, Sequim, Renton, Wenatchee, Moses Lake, Walla Walla, Vancouver, Skagit County, Bainbridge Island, Orcas Island, Snohomish County, and Stanwood. 

Just as we serve the whole of Grays Harbor County, each community foundations is defined in part by serving a specific geographic area. 

The oldest community foundation in Washington State is The Seattle Foundation, established in 1946. 

Also of interest:  a new and very thriving community foundation is Bellingham's, the Whatcom Community Foundation.

There are more than 650 community foundation throughout the United States.  A useful tool for finding specific community foundations in other parts of the country can be found at www.cof.org/cflocator.

{Back to Questions}

How do community foundations differ from private foundations? 

A community foundation is supported by a broad and ever-widening group of unrelated individuals, families, corporations, and institutions.  The only thing that connects all of our donors is a desire to improve local communities. 

Because of their broad base of support, community foundations are classified by the IRS as publicly-supported charities.  This gives community foundations tax advantages not enjoyed by private foundations. 

Community foundations are also allowed to treat all funds within their control (known as "component funds") as part of a single corporation.  This gives them administrative advantages over private foundations as well.

Private foundations, by contrast, are generally supported by a single individual, family, or business.  Rarely does it make sense to establish a private foundation if the principal endowment is not large.  Today, of course, the world's largest foundations -- Gates, Ford, Kellogg -- are all still private foundations. 

To prevent abuse and self-dealing, private foundations have been subjected since the 1970s by the IRS to numerous penalty taxes and legal requirements.  For a more detailed comparison of the differences between private and community foundations, click here.

Because community foundation are controlled by large, diverse, and unrelated boards of directors and the possibility of abuse is slim, the IRS does not impose any tax penalties or burdensome legal requirements on community foundations.

{Back to Questions}

How do community foundations differ from other nonprofit organizations? 

Most nonprofit organizations have a specific mission.  By contrast, a community foundation’s mission is very broad:  to improve the quality of life in a given area.  This breadth of mission reflects our ability to make grants in any field of interest with a charitable benefit to local communities.

This flexibility allows us to serve a wider group of potential donors on the one hand and, on the other, a wider group of nonprofit organizations whom we consider our partners in improving local communities. 

Area nonprofits benefit from having a local community foundation because the community foundation helps money stay in a community.  Community foundations benefit local nonprofits in other ways, too:  besides having local grant money available, some nonprofits ask the community foundation to manage an endowment on their own behalf.  We call such funds "agency endowment funds."

As it grows, a community foundation gradually becomes the center for all charitable giving in a community.  We help make connections between the people who want to give and the people who need their support.

{Back to Questions}

How do community foundations differ from the United Way? 

We are similar in one way and different in three:

1. We are similar in that, while most nonprofit organizations have specific missions, both community foundations and local chapters of the United Way aim to serve a broad range of charities in a given area.  The Grays Harbor Community Foundation and the United Way of Grays Harbor both serve the same geographic area, and the types of charities we aim to support often overlap. 

2. We are different in three separate ways. 

   1. While the United Way tends to focus on essential human needs and charities which provide social services, community foundations serve all needs in a given area.  We support most organizations the United Way supports, but we also support recreation, arts and culture, education, community and economic development, scholarships, and special projects.

   2. The United Way focuses its work on an annual workplace fundraising campaign.  Funds raised during a given year are generally used that same year.  Community foundations, by contrast, do not mount annual campaigns, seeking instead to attract large, long-term gifts.  A community foundation’s grantmaking and operations are supported primarily by the annual income generated by the foundation’s endowment.

   3. Community foundations focus on attracting and managing permanent endowments.  Most chapters of the United Way, including the United Way of Grays Harbor, do not attempt to manage long-term funds or permanent endowments.  The board and staff of our local United Way agree that, in our community, that's the role of the community foundation.  It is sometimes said, although the metaphor in our opinion lacks inspiration, that the United Way is a community's "checking account," while its local community foundation is its "savings account."

The Grays Harbor Community Foundation and the United Way of Grays Harbor support each other's work and missions and try to work together whenever possible.

{Back to Questions}

What are the alternatives to using a community foundation? 

Donors interested in giving a gift of lasting benefit to their communities have several options.  All donors will benefit from visiting this information page about a broad range of charitable giving options.

Community foundations offer several different fund types which can be tailored to fit donors' unique interests.  (See our section on Ways You Can Give.)

Some donors may choose to establish a separate private foundation.  We have described the major differences between private and community foundations here.  To learn more about establishing a private foundation, you'll want to contact an attorney. 

Others may be interested in "donor-advised fund" programs offered by other types of nonprofit organizations.  Donor-advised funds are a type of grant-making fund which was first designed and offered by community foundations beginning in the 1970s.  Their incredible success has brought many competitors into the field, and donors now have many options.

Certainly among the most interesting possibilities are the nation-wide "commercial gift funds" offered by many large financial services corporations.   For links to these types of programs, see the Fidelity Charitable Gift Fund, the Vanguard Charitable Endowment Program, or Salomon Smith Barney's Charitable Investment Fund. 

These programs benefit their parent for-profit corporations by directing new money for investments to the mutual funds offered by each company.  They have done a remarkable job of attracting new donors and consolidating various sources of charitable giving across the country.  What these types of programs lack is knowledge of community needs, and donors are on their own when it comes to making grants.  We as a community foundation encourage donors to think of the benefits of keeping their money in local institutions with ties to local needs.

If all you're interested in is giving a simple gift to a few charities, you should of course just give to those charities directly.  A community foundation and its several alternatives offer benefits only to the person who is interested in giving a longer term gift or whose situation calls for more careful financial planning.

{Back to Questions}

How can I find out more about community foundations? 

The internet is an extraordinary tool for learning more about community foundations.  Community foundations have long been among the most innovative and progressive grant-making institutions in the United States.  Many have taken full advantage of the internet's possibilities. 

Perhaps the single best resource is the long list of community foundation websites, available from the Council on Foundation's website:  www.cof.org/cflocator.  We can recommend a few websites for your perusal:  xxx, xxx, xxx.

We also have materials in our office that we would be more than happy to share with anyone interested in learning more about us.  Just call us and we'll be glad to help.

{Back to Questions}

What is the Grays Harbor Community Foundation? 

We are Grays Harbor County's community foundation.  We are a 100% local institution, governed and staffed by local people who share a desire to improve our county as a whole.

The Grays Harbor Community Foundation enables any person interested in improving Grays Harbor to establish a fund, permanent or temporary, for almost any charitable purpose which benefits local residents. 

Year after year, the income from a permanent fund might be used to make grants to local charities who apply for grant support, fund scholarships for local students, or make regular contributions to one or more specific local charities. 

We handle the administrative details of all such funds, making it easier for more people to get involved in long-term philanthropy.

For more information, read our full introduction.

{Back to Questions}

What are the goals and mission of the Grays Harbor Community Foundation? 

The Grays Harbor Community Foundation aims to improve the quality of life in communities throughout Grays Harbor County.

We fulfill our mission by:

• Promoting philanthropy at all levels of giving

• Seeking permanent endowment funds and other contributions from a diverse and ever-widening group of donors

• Helping donors achieve their charitable and financial goals by offering services that make charitable giving easy, effective and satisfying

• Providing responsible and effective financial management

• Distributing earnings from investments according to community needs and donor intent

• Championing good works in every community we serve.

The current goals of the Grays Harbor Community Foundation are many: 

• We want more people to know about our work in Grays Harbor County.

• We want more people to use use our community foundation to make connections between people and between institutions.

• We want to build a more substantial endowment to support our broad-based grant making program through gifts from a wide range of donors.  Currently we are unable to give very substantial support to the many organizations who are interested in applying for grants. 

• We want more people who once lived in Grays Harbor County but no longer do, to consider using our community foundation as an easy way to give meaningful support to their former communities. 

  {Back to Questions}

How is the community foundation funded? 

Our major source of support comes from contributions of cash, securities, and real property from local individuals, families, businesses and foundations. 

Such contributions are often made as simple gifts, but many choose to give through their will or by using a form of planned giving such as a charitable remainder trust (for more information, see Ways You Can Give). 

We cover our operating expenses by charging a small annual fee of 1% to each fund.  In addition, some gifts we receive are specifically designated for our operating costs. 

{Back to Questions}

What is the history of the Grays Harbor Community Foundation? 

We were established in 1994 by Frank H. Larner, a retired Aberdeen CPA who still serves as our president, and Gladys Phillips, the late Aberdeen attorney and civic leader who at one time helped lead the Bishop Foundation.  Frank and Gladys knew the potential of our community well and saw a need to establish a community foundation that could give long-term benefit to Grays Harbor.  We have grown slowly but steadily since 1994, with the greatest advance coming from the bequest of Kathryn Sherk, who in 2000 left us approximately $4 million for "capital improvement projects of the Aberdeen Public Library."  The Sherk Fund remains the largest of our sixteen funds.

{Back to Questions}

How does Grays Harbor County benefit from having a local community foundation? 

Our community foundation offers two primary benefits to the Grays Harbor area: 

1. We help raise the level of local giving, and we help keep charitable dollars in the local community.  It is our aim to build a local source of charitable capital that will become a steady, long-term resource for our communities. 

2. We help to ensure that charitable endowment gifts given to help our community will remain effective and relevant over long periods of time.  Even as local needs and giving opportunities change, a community foundation is able to adapt charitable funds to find relevance in a changing community.  To give a colorful example, we help make sure that, as happened 100 years ago in New York City, a fund set up to buy snuff for poor elderly women in Central Park won't go unchanged and unused if -- as we hope is true by now -- poor elderly women in Central Park no longer use snuff. 

{Back to Questions}

What is an endowment? 

An endowment is a type of fund that is set up to produce income for charitable purposes.  A typical endowment fund will distribute only the income generated from investments.  Its principal will never be distributed.  A typical distribution rate from a foundation endowment fund is 4% or 5% per year.

An endowment fund is likely (though not, of course, certain) to remain permanent as long as principal is never invaded, and as long as the distribution rate reflects the long-term growth patterns of investments.

{Back to Questions}

What happens to a contribution to the Grays Harbor Community Foundation? 

There are several possibilities, depending on a donor's wishes.  The major possibilities are five:

1. If a donor makes an unrestricted gift, the contribution will be added to and permanently recognized in The Fund for Grays Harbor.  (Alternatively, some donors may wish to establish and name a separate unrestricted fund.)  The income from the total fund (built up by many donors over many years, one gift at a time) will be distributed annually for charitable purposes as determined by the board of directors.  Unrestricted contributions directly support our general grants program.

2. Other donors may want to support a general area of need in our county (education, children’s health, or arts and culture, for instance).  Such area of interest gifts support specific areas in our grants program.  These contributions will never be used for projects outside their specified area.  We have two such funds already established:  the Arts & Culture Fund and the Youth & Families Fund.  Contributions of any size are always welcome to support these funds.  Again, all specific grant-making decisions from area-of-interest funds are made by our board of directors. 

3. A few donors ask us to restrict the use of their gift to one or more specific nonprofit organizations.  These gifts create what are called designated funds.  A community foundation will often be asked to handle such gifts because of its experience with managing endowments.

4. Many donors choose to establish donor-advised funds.  In this case, the donor may periodically recommend to the foundation that a distribution be made to a specific nonprofit organization.  (The Grays Harbor Community Foundation is not legally bound to follow these recommendations.  However, we will do so in most cases when the intended grantee is a legitimate nonprofit organization and is doing work consistent with the mission of the foundation.)  Donor advised funds are especially suited to donors with a variety of charitable interests and an interest in getting and staying involved with philanthropy.  They are an attractive alternative to establishing a private foundation, which is typically less efficient and more costly.

5. The community foundation also operates a scholarship program which allows donors to create new scholarships in memory of loved ones without the complexity and expense of having to establish and administer each scholarship separately.  We accept donations of any size to support existing scholarship funds, including our general scholarship program, but we ask donors interested in establishing new scholarship funds to seek our assistance in designing the new funds.

The community foundation can also be used for a variety of other purposes, including short-term gifts, pass-through grants, and gifts which allow a donor to remain anonymous.

{Back to Questions}

How does a community foundation invest its funds? 

If funds are designed for long-term use, we invest our funds in common stocks and fixed income securities in accordance with a prudent, long-term asset allocation strategy.  We do not manage our investments from day to day; we hire professional managers to do that for us.  Our responsibility is to balance our overall investment program in light of our long-term investment goals; to monitor performance regularly; and to review and change management as necessary to ensure that we meet or exceed our performance benchmarks. 

If funds are designed for shorter-term use, we design an appropriate short term investment strategy.  Short-term investment vehicles include certificates of deposit, fixed income securities, and money market funds.

{Back to Questions}

What are the tax advantages of donating to a community foundation? 

We offer the best tax advantages for charitable donations available under law.  We are a publicly-supported non-profit organization, qualified under section 501(c)(3) of the internal revenue code.  By avoiding classification as a private foundation, we are able to offer greater tax advantages than does a private foundation.  See our comparison of private and community foundations for more details.

{Back to Questions}

Who are the current board members? 

Our current board members are listed here.

How are board members chosen? 

New board members are selected by the current board of directors.  Board members may serve for up to three consecutive four-year terms.  Former board members are invited to serve on the foundation’s advisory council. 

The board selects new members who will help the foundation broadly represent the entire community.  Board members are chosen for their experience, knowledge, and dedication to building community in Grays Harbor County. 

Current board members bring to the foundation a wide range of expertise, including backgrounds in finance, business, education, government, law, medicine, accounting, and nonprofit operations. 

{Back to Questions}

How is the Grays Harbor Community Foundation staffed? 

Executive Director Scott Larson is the foundation's only full time staff member.  Most of the foundation's accounting work is handled on an hourly basis by Jan George, an employee of Preszler, Larner, Mertz & Co.

Prior to Scott's arrival at the foundation in October 2001, almost all work of the foundation was handled pro bono by the foundation's president, Frank H. Larner.

{Back to Questions}

How can an organization apply for a grant from the Grays Harbor Community Foundation? 

We require all grant seekers to submit a formal grant application.  We make our Grant Application & Guidelines available through our website, or by calling our office.  Our application packet is linked here.  We explain the process of applying more fully there.

{Back to Questions}

How does the community foundation select grant recipients?    

Our Grants Committee is responsible for reviewing grant applications and recommending grant recipients to our full board of directors.  Our full board of directors must give final approval to the committee's recommendations. 

Our priorities and limitations are as follows: 

The Foundation will:

• Make grants only to qualified, tax-exempt nonprofit organizations for work directly benefiting residents of Grays Harbor County, Washington;
• Place a priority on projects that help build community and help strengthen community connections;
• Favor those applications that show the greatest promise of leveraging additional support from the community;
• Favor creative projects that meet specific community needs and benefit a broad segment of the local population;
• Make grants in the range of $500 to $5,000.

The Foundation is less likely to:

• Make grants over $5,000;
• Make grants for more than one year;
• Make grants for operating support without special circumstances.

The Foundation will not:

• Make grants when the activities are not clearly described;
• Make grants when the goals are not specific or realistic;
• Make grants when the income and expense statements are incomplete or unclear;
• Make grants to individuals, government agencies, or religious organizations for religious purposes;
• Make grants for endowments, debt retirement, political campaigns, fundraising events, advertising, or conferences;
• Make grants to organizations that discriminate on the basis of ethnicity, gender, religion, or physical ability.

{Back to Questions}

What are the potential sources of funding for a grant application?    

Community foundations hold multiple component funds named after their donors.  Some grants are made from funds at the recommendation of the funds' advisors.  In other cases, our grants committee may suggest that a certain grant comes from a specific fund.  In any case, a particular grant may come from one or more funds held by the community foundation.  In our award letter we will explain how grant recipients are to respond when a grant is awarded with multiple funding sources.

{Back to Questions}

What size grants are reasonably likely?    

Generally we expect to award grants between $500 and $5,000.  At this time, due to limited funding, we are not likely to award grants above $5,000.

{Back to Questions}

How can I apply for a scholarship from the community foundation?    

We explain the answer to this question in great detail under Scholarships. 

Some scholarships administered by the Grays Harbor Community Foundation are not open to general applicants.  These are scholarships open only to graduates of a specific local high school.  The recipients for these scholarships are selected by committees at each specific high school.

{Back to Questions}

How are scholarship recipients chosen?    

All scholarships are awarded on the basis of academic performance and financial need as well as qualitative judgments of character and ability, industry and service.  For more details, see our section on Scholarships.

{Back to Questions}

Grays Harbor Community Foundation is a tax-exempt public charity dedicated to serving the broad needs of Grays Harbor County in Washington State.  We are a member of the Council on Foundations; we have committed ourselves to the National Standards for U.S. community foundations; we are audited annually; and we consider ourselves accountable to the public upon whom we depend for support.

We thank Darrell Westmoreland, Kevin Hong, Ellen Pickell, and the Polson Museum for providing the photographs used in this website.  We'd like to showcase the work of more local photographers and artists on this website and in our publications.  Please contact us if you'd like to help. 

Mail:        707 J Street  |  P.O. Box 615  |  Hoquiam, WA  98550

Email:      info@gh-cf.org

Phone:     360.532.1600

Fax:         360.532.8111

Last modified: 01/11/06