Agency Endowment Funds
The main purpose of an agency endowment fund is to provide a long-term and growing source of financial support for an organization. In these days of uncertain funding, nonprofit organizations are looking for ways to stabilize their income and ensure their operating funds. One of the ways organizations can do that is by establishing an agency endowment within the New Canaan Community Foundation.
The New Canaan Community Foundation can be a great help in managing your organization's endowment. Classified for tax purposes as a public charity rather than a private foundation, community foundations specialize in managing permanently endowed funds for the benefit of a specific charitable cause or the general welfare of the community. A community foundation is often described as a pool of endowed assets.
An agency endowment fund is created for the express purpose of providing a source of permanent, ongoing support to a specific nonprofit organization. A portion of the income from Agency Endowment Funds is distributed to the organization annually while the principle grows to provide future benefits. The endowments usually allow other donors to make contributions as well, growing the fund.
The New Canaan Community Foundation provides a natural setting for permanent gifts such as an agency endowment. Important benefits most often cited are:
- Investment with larger pool of assets and access to higher returns
- Professional investment oversight
- Simplicity in receiving and processing additional contributions to Fund
- Allows organization to focus on other priorities
- Boosts donor confidence
- Preparation and filing tax returns related to that endowment
- Administrative Support
The community foundation has legal ownership of funds contributed to an agency endowment. As such, the community foundation's board has fiduciary responsibility over the funds. A fund agreement for an agency endowment may permit an agency to request or recommend a distribution of principal. Community Foundation ownership of the assets in the fund* helps provide a layer of separation to ensure the fund is maintained in perpetuity. This separation can provide a "buffer of protection" from excessively spending your endowment to meet short-term needs, which can erode donor confidence, violate donor intent, and jeopardize the long-term health of your agency. Putting the assets with the Community Foundation can also insulate them from liability and litigation.
*While at the Community Foundation, the assets become the property of the Community Foundation — as required by IRS regulations. Ultimate control of investments and disbursement is given to the Community Foundation's board while the funds are held by the Community Foundation. The agency may request that the funds be returned under certain conditions, by a resolution of its board and concurrence by the Community Foundation board, as outlined in your individual fund agreement.
For more information about establishing an agency endowment for your organization or one that is important to you, please contact the NCCF office.
