More than 100 Pioneer Valley charities have established funds at the Community Foundation with assets donated to them or accumulated over time. Starting a fund at the Foundation provides services that many nonprofits may find advantageous.
Sophisticated professional investment management
Funds are professionally invested under the supervision of local, community-based financial experts who have experience in building and preserving funds in perpetuity. Agency funds are pooled with other assets of the Community Foundation for fuller diversification, with each fund accruing its own share of the earnings. An Agency Fund relieves agency staff and board of responsibility for accounting and management of its invested funds.
Credibility of the Foundation’s strong reputation for fiscal stewardship
Charities with Agency Funds at the Foundation may enjoy the increased visibility provided by being a part of our larger giving community. Agency Funds are listed in the Foundation’s Annual Report which receives widespread circulation. An agency fund may enhance a charity’s fundraising prospects because some donors may wish to support charity, but prefer the relative long-term security of the Community Foundation, particularly if they wish to insure that their gifts are endowed forever.
High quality, cost-efficient administration and stewardship services
Foundation staff processes timely, personalized gift acknowledgements and quarterly statements of fund activity.
Acceptance of unusual assets such as privately held stock, mutual fund shares, and real estate
Agency can receive the benefits of gifts that are highly advantageous to donors, but difficult for charities to process.
Planned giving services
The Community Foundation administers charitable gift annuities, charitable remainder trusts, and lead trusts which direct gifts to endowed agency funds. This service is a way for agencies to avoid the costs and liabilities of offering their own planned giving program. The Foundation serves as a partner by administering the gifts, providing advice on marketing planned gifts, and by working with potential donors and their advisors to answer technical gift planning inquiries.
Fundraising advice and counsel
While the Community Foundation is not able to serve as the fundraising arm of those charities with Agency Funds, our experienced development staff is available to meet or consult by telephone with agency directors, board members, finance committees, development committees, and even donor prospects to discuss fundraising strategies and techniques.
Important Considerations for Agencies:
Ownership of assets
Both income tax and securities laws require the Community Foundation to own the assets in the funds it administers; therefore, establishing a fund requires the charity to transfer title of the assets to the Foundation.
Agencies may choose to make funds Permanently Endowed or Agency Advised.
- Agencies can choose to endow funds permanently, with regular distributions in accordance with a policy established by the Community Foundation in an attempt to provide long-term protection of the principal (currently 4.25% of principal annually.)
- Or, funds can be set up as agency advised with the right of the agency to recommend distributions of both income and principal whenever desired. It should be understood that, if so recommended, the Community Foundation is permitted to return the entire balance in this fund to the agency, but title to the monies in this fund is in the Community Foundation of Western Massachusetts, and recommendations for subsequent distributions may not be binding instructions.
It is not economical for the Community Foundation to administer funds with a long-term balance less than $10,000, but that balance may be accumulated over a five year period at a rate of $2,000 per year. Amounts in excess of that minimum each year (including earnings from the fund’s investment) would be available for recommended distribution from Agency Advised Funds; distributions from Agency Endowed Funds are not made before the $10,000 minimum is reached.
The Community Foundation is a not-for-profit organization and charges an administrative fee, reviewed annually by its Trustees, to cover the costs of its operations. That fee for Agency Advised Funds is currently 1.25% of the principal annually, and the fee for Agency Endowed Funds is currently 1% of the principal annually (with a minimum annual fee of $125 in either case).
This administrative fee is in addition to the relatively low cost expenses of the fund’s investment. For example, our primary investment portfolio (Global Growth) has an investment management fee of approximately 12 basis points for all index fund investments and significantly higher fees for the alternative asset class, which represents up to 15% of the portfolio.
Learn more about the steps to Start a Fund
Contact us, so we may assist you in starting an Agency Fund.