Chester County

     COMMUNITY FOUNDATION

Nonprofit Endowment Services for Agencies, Service Clubs and Churches

For successful, mature nonprofit and service organizations, the development of a permanent, tax-deductible endowment fund is critical step in ensuring your long-term success.

A healthy operating endowment will provide permanent stability for your operations and/or key programs, and therefore give reassurance to employees, volunteers and donors.

An endowment tells the funding community that yours is a stable entity, striving for self sufficiency and worthy of their financial support.  Over time, the growth of your endowment through investment return and additional bequests will enable you to return even more resource tot he clients you serve.

Getting Started

If your agency has not yet started an endowment, creating one could be the most important thing that your board can undertake, even though it mat not benefit the current board or staff for many years to come.  There are four things in particular that directors should be alert to:

      Preserve the principal from possible invasion by future boards or staff

      Protect the fund from decreasing in value due to unwise investment decisions

     Insulate the proceeds of fund from mis-use by future boards or committees

      Do not allow your endowments to become stagnant and forgotten

As prudent board members, you will want to:

      Protect the principal

      See that the endowment grows through wise investment

      Protect the intended use of endowment distributions long into the future

      Make ongoing contributions to its endowment an integral part of your organization's development plan.

The Role of the Community Foundation

Only the Community Foundation can ensure that all of these things will happen, and that the money that has been meant for the long-term benefit of your agency will continue to serve that purpose.

Because the money that you entrust with CCCF essentially belongs to the community foundation on your behalf, future boards will not be able to tap into the principal of your endowed fund.  The endowment will also be safe from any legal claims that could be made against your organization in the future.

Funds placed with the Community Foundation are invested for maximum return with minimum financial risk. Over time your endowment should grow as the result of better-than-average investment results -- CCCF funds have enjoyed an average of 16% annually growth during the past two years (*)

              (*) Prior investment result is no guarantee of future performance

This type of return will enable the Community Foundation to distribute more each year to your agency -- typically, 5%  of the average annual assets.  Or, if you wish, you may leave funds with the Foundation to grow over any period of time -- there is no required annual distribution for community foundations.

The use of your endowment -- such as for operations, scholarship or specific programs -- will be clearly spelled out in the initial documents that we draft at your direction,  Once again, because the endowment is protected by the Community Foundation, future boards may not change the purpose for which the endowment is created.

Assistance with Donors

Your endowment will provide an attractive instrument for individuals who care about your agency, but are concerned that their gifts be used as they specify.  CCCF can provide this reassurance, plus help you make presentations to key prospects.

The Community Foundation also enable your donors to realize the full deductible value for gifts of appreciated stock and property, and they receive the maximum value permitted for gifts of cash (50% of AGI.)

Should your prospects have certain restrictions or conditions they wish to apply to their gift, or want to divide their gift among more than one charitable cause, the Community Foundation can serve in a fiduciary role to see that their wishes are met.  We can also manage gifts as separate "named funds,' based on gift minimums that your board established.

Cost and Organization    

There is no cost to establish an agency endowment, and the foundation's annual fee to manage your fund is just 1% of annual asset value.  You can assign trustees (such as the current board) to oversee the continued purpose of the endowment fund; or the board of directors of the Community Foundation can serve in this capacity.

Should your agency ever cease to exist or change its function, the board of the Community Foundation will ensure that the original purpose(s) to which this endowed fund was directed, as well as any terms of individuals donors' gifts, continue to be honored.

Of course, your endowment will be prominently referenced in all of the Community Foundation's annual reports and fund lists going forward, thereby providing added credibility and reassurance to your donors.

The Community Foundation is the only charitable vehicle that provides this sort of cost-effective service, control and flexibility.  We presently manage over 20 permanent endowment funds for Chester County nonprofit organizations, representing $1.5 million in assets.  We look forward to serving your agency as well.

Questions & Answers

Once we set up an endowment fund, can the agency draw from it in case of emergencies?

What you are describing is an "emergency fund," not an endowment.  The entire concept of an endowment is based upon never invading principal.  If you anticipate future emergencies, you may wish to create both types of funds.

What happens if the community foundation goes out of business?

This rarely, if ever happens.  But should this occur, you would have the right to transfer the assets to any of the other half-dozen community foundations in our region, all of whom have endowment management services.

Is there any restriction to what distributions from our endowment can be used for?

Not so long as the use is for charitable purpose.  For example, annual distributions to support a nonprofit agency's operations would quality, as would support for programs they provide.  Grants made for scholarships and for re-granting purposes, so long as the selection  processes are fair, would also be appropriate.  In general, annual distributions are made in care of an agency's board after they have provided a letter describing proposed use of the funds.

How does the community foundation support agencies that maintain endowments with CCCF?

We are happy to provide technical support to help grow your endowment, such as letting you host fundraisers and development meetings at the Lincoln Building, or reviewing  your proposals for "fundability".  We can meet with key prospects on your behalf, make referrals for estate planning purposes, and co-submit with you for grants from external funders.

How often do you report on the statuses of endowed funds?

Reports are issued twice-yearly, following the 12/31 and 6/30 periods.  They detail contributions made, fees charged, interest and dividends earned, and any distributions that have been made. Distributions typically occur in the period following the 6/30 report, and represent 5% of the average annual value of your fund, calculated over up to a five year period.

Won't donors think we are "rich" if we have an endowment, and therefore be less willing to give us grants?

Just the opposite.  Donors tend to think more highly of agencies that have created endowments, and they have more faith ion the agency's long-term existence because it has a guaranteed stream of income.

Will donors consider us more seriously for bequest if we have an endowment?

That depends upon how well you promote and communicate its existence -- calling it a "Legacy Fund," for example, and creating a separate brochure. However, without such a vehicle, it is unlikely that donors will seriously consider bequests.

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