Presentation Transcript

1. Community Foundation Basics For Board Members Unit 1 Community Foundation Overview
2. Definition of a U.S. Community Foundation Nonprofit, tax exempt under section 501(c)3 Independent, non-sectarian governing body Publicly supported by many unrelated donors Goal of building permanent endowment funds Focused within a defined geographic area Grantmaking is not limited by field of interest or to specific populations
3. History of Community Foundations 1914 - The first community foundation was established in Cleveland, Ohio. Within five years, community foundations formed in places like Indianapolis, Chicago, Boston, Milwaukee, and Minneapolis. 1969 - Tax Reform Act private foundations becoming more strictly regulated community foundations became a more attractive option In the 1990s, commercial financial services firms, such as Schwab, Fidelity and Vanguard, began to offer donor-advised funds. 1990s-today – increasing emphasis on CF role in community leadership There are over 800 community foundations in the United States and about 1,400 existing around the world.
4. GIFT History Created in 1990 by lilly endowment inc. Establish permanent charitable assets across Indiana Support local communities and build civic participation Series of 5 grant phases over first several years Additional programs – Taking Stock, CAPE, SRD, interns Unique program in community foundation world Currently Indiana has 74 legal entities covering all counties in Indiana All Indiana CFs - Over $2 billion in assets

5. Indiana Community Foundations

6. Community Foundation Roles Permanent endowment building Develop relationships with donors Invest and protect the principal of donor gifts Distribute earnings from these gifts based on charitable intent of the donor Build a permanent resource for the future Understand community needs Re-direct charitable dollars over time and as community needs change Strengthen existing organizations Bring new and innovative charitable organizations into existence Can be proactive or responsive Broad, flexible grantmaking Community catalyst Convener, facilitator and collaborator Promoter of philanthropy
7. Community Foundations – The Really Big Picture
8. Community Foundation Basics For Board Members Unit 1 Community Foundation Overview

   A Few Legal Concepts

9. What Does Charitable Mean? Charitable (generous) IRS Charitable (tax deductible) Nonprofit Charitable
10. Section 501(c) – Tax Exempt Organizations Mutual Benefit Orgs Public Charities 501(c)(3) Private Foundations 501(c)(3) Other Publicly Supported Charities 509(a)(2) One-third of charity’s support is from the general public Supporting Organizations 509(a)(3) 501(c)(4)-Civic leagues 501(c)(6)-Business leagues, chambers of commerce, real estate boards Others Traditional Charities 509(a)(1) Hospitals, Schools, Churches, Government Publicly supported nonprofits (including community foundations)
11. It’s Nonprofit - Shouldn’t It Be easier? For profit businesses have direct relationship with the consumer; exchange money for product/service Nonprofits need to convince a third party (individual, foundation, corporation, government) to give them money to provide benefit to consumer Success is measured by achieving mission, not producing a profit – very hard to measure Donors get to restrict how nonprofit spends the donation; this makes nonprofit accounting more complex
12. What is “Variance Power”? A distinguishing characteristic of community foundations, the variance power permits the community foundation’s governing body to redirect resources in component funds if it determines that the donor’s restriction is unnecessary, incapable of fulfillment or inconsistent with the charitable needs of the community or area served.
13. UMIFA (UPMIFA) The Uniform Management of Institutional Funds Act (UMIFA), adopted in 1972, provided uniform and fundamental rules for the investment of funds held by charitable institutions and the expenditure of funds donated as “endowments” to those institutions. In 2007, UMIFA was changed to include the word ‘prudent’ (UPMIFA). The UPMIFA (UMIFA in Indiana) now allowed the boards of institutions with endowment funds to spend principal of endowment funds when considering the following elements: Duration and preservation of the endowment fund Purposes of the foundation and the endowment fund General economic conditions Possible effects of inflation or deflation Expected total return from income and appreciation of investments Other resources of the foundation Investment policy of the foundation UPMIFA
14. Pension Protection Act (PPA) of 2006 Senate Finance Committee Review ofAbuses in the charitable sector: Abuse of donor-advised funds Over-valuation of non-cash gifts Control by donors over scholarships Personal benefit by donors Misuse of supporting organizations And other problems!
15. Conflict of Interest Board members have a legal obligation to act in the best interest of the organization A “conflict of interest” occurs when personal interests prevent a board member from making an impartial decision Can be financial or non-financial Written conflict of interest policy ensures that public trust is not violated Policy should include procedures on - Disclosure Recusal from discussion or voting
16. Key Legal Documents Articles of Incorporation A document filed with the secretary of state by persons establishing a corporationestablishing the purpose of the corporation. Bylaws Rules governing the operation of a nonprofit corporation, developed according to state law requirements. Bylaws provide the methods for selecting directors, creating committees, and conducting meetings.
17. Key Legal Documents Minutes Official written record of the community foundation’s business. All important decisions made by the community foundation should be documented in the board minutes as stated in the National Standards section on Mission, Structure and Governance. Examples include approval of: new policies new funds changes in funds budget adoption payout percentages, etc. board member abstentions and recusals grant and scholarship recipients
18. The National Standards include the definition of a U.S. community foundation as well as standards in each of these categories:

    National Standards forCommunity Foundations

    Mission, Structure and Governance Resource Development Stewardship and Accountability Grantmakingand Community Leadership Donor Relations Communications
19. Glossary of Terms – Council on Foundations National Standards for Community Foundations Sample Conflict of Interest Policy Could you Give Us Our Money Back, Please?