Charitable Endowment Funds

What It Is:

Funds are established by charitable organizations as permanent funds to ensure an ongoing source of support for their programs and operations. The charitable organization transfers ownership of the fund to the Community Foundation under agreement and the annual income is distributed to the charitable organization in perpetuity.

How It Works:

A charitable organization creates a designated fund at the community foundation. The fund is owned by the Community Foundation, however, the income is directed to the charitable organization. Donors can make contributions to the fund through the charitable organization or directly through the Community Foundation.

Advantages:

By placing an endowment fund into the Community Foundation investment pool, the charitable organization increases its opportunities for maximizing income while reducing investment cost. The charitable organization is relieved of the internal accounting and reporting required as periodic statements on principal and income status are provided by the Foundation. In addition, an annual audit is performed by independent auditors as part of the Foundation's regular audit procedure.

By transferring ownership to the Community Foundation, the fund is protected from encroachment by future boards. Community Foundation ownership also provides added reassurance to donors that their gifts will be held in perpetuity for exclusive use by the charitable organization or for a similar purpose should the charitable organization cease to exist.

Transfer of capital funds also removes the fund from the charitable organization's financial statement, which may eliminate misunderstanding about the actual funds available to the agency for immediate use.

Disadvantages:

The fund is non-encroachable by the charitable organization, even during times of extreme financial need.