The Welfare Federation of Los Angeles Area, sometimes referred to as the Los Angeles Community Federation, was incorporated on March 12, 1924, to serve "as a central bureau through which all funds for charity, relief, and welfare work may be solicited, collected, held and disbursed." Shortly thereafter, on May 29th, 1924, the Los Angeles Community Chest was incorporated, with the backing of the Los Angeles Chamber of Commerce, after two years of conflict among leaders of private social service agencies, many of whom feared that the future of welfare services in the region was likely to be controlled, through the Chest, by Los Angeles' business community. The first 27 volunteer directors of the board of the Welfare Federation were philanthropic leading citizens, with some experience in the administration of charitable institutions, who stepped forward at a critical moment when other leadership had failed. On January 2nd, 1925, with an encouraging fund of $2.5 million raised in the Chest's first campaign, the Welfare Federation began operations.
Membership in the Federation was open to all agencies licensed by the Social Services Commission to solicit funds for charitable purposes in Los Angeles. The Federation was anxious to have representation from as many agencies as possible so as to achieve some consensus of opinion on topics of general concern to the social work community. In the first year after its incorporation the Federation's research department discovered over one hundred privately supported charities in Los Angeles whose existence had previously been unknown to any official body. These small agencies were, in effect, answerable to no one so long as they refrained from public fund-raising. Only those agencies who agreed to forego their own individual fund-raising efforts, and to open their operations to Federation inspection and direction, were eligible to share in the money raised in Community Chest campaigns. Many large agencies, and particularly those with national and international connections, such as the Red Cross, the Salvation Army, and the Y.M.C.A. were unwilling to become Chest agencies on such terms and continued with their own year-round charitable appeals. The Federation attempted to reach agreement with fund-raising agencies so that their activities did not coincide with the Chest's annual campaigns. Although it was highly influential, the Federation had no legal authority to prevent individual fund-raisers from operating in a manner likely to detract from the effectiveness of the Community Chest.