Donors may create an Endowed, Intermediate Endowed, or Non-endowed fund according to their specific needs, or they may contribute to a previously established fund that supports causes they favor. All funds, except those for which anonymity is requested, are listed in the Foundation’s Annual Report.
Non-endowed Funds allow the donor or the donating organization maximum flexibility in structuring the fund. The fund maintains a minimum balance, any amount over is available for distribution. For individuals or corporations looking for a more efficient way to give, a Non-endowed Fund is a popular, flexible way to achieve philanthropic goals. The three types of Non-endowed Funds are:
• Donor Advised
• Field of Interest
Intermediate Funds are non-endowed funds that are treated like endowment funds for the purposes of investment. All principal, subject to the sale of investment assets, is available for distributions. Types of Intermediate Funds are:
• Donor Advised
• Field of Interest
• Non-Profit Organization
In an Intermediate Fund, all principal is available for distribution, but is not usually distributed.
This type of fund allows the donor to:
• Receive the services of the Foundation
• Benefit from the Foundation’s investment strategies and spendable amount options
• Have the flexibility of principal distributions from the fund
This type of fund is not suitable for liquid investments. Donors can use this type of fund to receive the benefits of an endowed fund and the flexibility of a non-endowed fund.
Endowed Funds are permanent funds in which the assets are owned by the Foundation and managed according to the charitable purposes designated. Since one of the goals of Endowed Funds is to preserve the principal, only the spendable amount is available for distribution. Types of Endowed Funds are:
• Donor Advised
• Field of Interest
• Non-Profit Organization Endowment
With an Endowed Fund, donors can:
• Create a philanthropic legacy for the donor’s family
• Make permanent provisions for favorite charities
• Provide for the community through Field of Interest and Unrestricted Funds to help meet pressing needs
• Help strengthen Foundation operations
• Potentially increase the fund over time through investment
Spending Policy For Endowed and Intermediate Endowed Funds
The Board of Directors of the Taos Community Foundation has determined that the annual spendable amount to be distributed by Endowed Funds is five percent of the 12 quarter average balance of the fund at the end of each year. For funds that have not been in existence for 12 quarters, the spendable amount will be five percent of the quarterly average balance of the fund since it was created.
The Board of Directors considers these factors in determining the annual spendable amount:
• The long and short-term needs of the communities served by the Foundation
• Expected and reasonable total return on the investments of permanent funds
• The reasonable cost of investing and administering funds
• The effect of inflation
• Price level trends and general economic conditions
• The purpose of the Fund
• The donor’s intent and instructions in establishing the Fund
For example, the amount designated for the first year of spendable income on a $50,000 fund would be no more than $2,500. By limiting the spendable amount to 5% or less, the amount available for distribution over the years is less susceptible to market fluctuations. Thus, the fund advisor can better anticipate the annual amount available for charitable purposes.
Contributions to Enable Additional Distributions
Donors may make contributions to the fund to add to the fund’s amount Available to Grant for the year. For example, if the spendable amount of an endowed scholarship fund is $750 and the donors want to grant a $1,000 scholarship, they could make a donation of $250 to the fund for the purpose of adding to the amount Available to Grant. Donors should let the Foundation know whenever they intend a contribution to a fund to be added to the amount Available to Grant, otherwise it will be added to the historic dollar value and be unavailable for distribution.
Variations on Spendable Amount.The Foundation’s Board of Directors determines annually the spendable amount (which is between 2% and 5%). Donors may wish to vary that spendable income policy and may elect to do so in a separate agreement with the Foundation. Donors shall be aware that, historically, endowment funds that distribute annually more than 6% of assets are likely to experience a decline in the principal of the fund over time. Please contact the Foundation for further information about spending policies for funds.
Spendable Amount Policies of Supporting Organizations and Their Funds
Because Supporting Organizations have separate Boards of Directors, the Board of each Supporting Organization makes its own decisions about its spendable amount policies.
Options for Giving
E I N Donor Advised Funds. Make a gift to the Foundation, and then remain actively involved in recommending grants from the fund.
E I N Designated Funds. Support the good work of one or more nonprofit charitable organizations.
E I N Field of Interest Funds. Target gifts to address needs in an area of particular interest (e.g. child abuse; performing arts; environment.
E I N Scholarship Funds. Provide assistance for individuals attending institutions of higher education or vocational schools
E I N Unrestricted Funds. Helps the Foundation be able to respond to requests for community needs.
E Endowed Funds: permanent asset of the Foundation, principal is preserved for long term; up to 5% annual spendable amount
I Intermediate Funds: invested for long term, with entire balance available for distribution
N Non-endowed Funds: entire balance available for distribution, very liquid, no investment earnings
Donor Advised Funds. Donor Advised Funds enable donors to receive an immediate tax deduction up to the maximum allowed by law for irrevocable contributions of cash, securities, real property, business interests and other gifts to public charities. Donor Advised Funds may appreciate through a range of professional investment management options. They permit grants from annual earnings and principal to benefit favorite charities as determined by donor interests. Distributions from Endowed Donor Advised Funds, like all permanent funds, may be made only to the extent of the annual spending rate determined and set by the Board of Directors.
Designated Funds. When donors already know which charitable organizations they want to support, a Designated Fund offers the ability to designate a Fund for one or more charitable organizations. Individuals use this Fund to support a nonprofit organization in which they have a special interest.
For example, a donor may establish a Designated Fund for the benefit of XYZ Charity and name the executive director of the charity as the fund’s advisor. The executive director would have the customary advisory privileges associated with the Fund (see the section titled Fund Advisors in this Guide for detailed information). If the benefited organization ceases to exist or changes its status as a charitable organization, the Foundation’s Board, as authorized by its bylaws, may select an alternative organization compatible with the donor’s original purpose. The benefited organization itself may recommend to the Foundation other potential recipients of the spendable amount from the fund.
Nonprofit Organization Funds. These funds are variations of the Designated Fund, only it is the nonprofit organization that establishes the fund (instead of an individual). Nonprofit organizations can benefit from the Foundation’s investment strategies to create endowments or intermediate funds using this type of Fund for support of operating expenses, programs or other needs.
Unrestricted Funds. These funds give the Foundation discretion to meet the changing or unforeseen charitable needs in the communities it serves. Donors can name these funds to honor or memorialize a loved one. Typically, the Foundation determines recipients through a competitive grantmaking process.
Field of Interest Funds. These funds benefit a broad charitable category rather than naming a particular charitable organization. Donors may describe the field of interest broadly or narrowly. For example, the fund could benefit the environment and emphasize air quality. It may benefit an entire area such as Taos County or a smaller community, such as the town of Penasco. The Foundation’s staff will assist donors in tailoring a fund to reflect their particular interests.
Scholarship Funds. Scholarship Funds provide grants for educational purposes at both graduate and undergraduate levels. Donors may recommend an academic focus for their Scholarship Fund (e.g., nursing or the arts) and eligibility criteria (e.g., financial needs, academic merit, geographic residence, community service). Scholarship Funds can be endowed, intermediate funds, or non-endowed.
Scholarship Fund Policies. Guidelines are developed for each Scholarship Fund. Standard content of the guidelines includes:
• Purpose of the Scholarship Fund
• Eligibility criteria (e.g., field of interest, minimum GPA, residency requirements, special eligibility requirements, etc.)
• Selection criteria (e.g., academic merit, financial need, community service)
• Application and selection procedure
• Scholarship selection process
• Amount of awards (if appropriate)
• Non-discriminatory clause
Notification and Payment of Scholarships. The Foundation will notify students in writing of the amount and general terms of Scholarship awards. No payments are made to individuals. Scholarship awards are paid to the students’ schools or a related auxiliary organization (e.g., bookstore).
Scholarship Renewal. Scholarships are awarded for one year but are subject to renewal if the fund provides for it and if students continue to meet the fund’s requirements for participation. Students may have to file an application for renewal each year and must demonstrate continued eligibility as stated in the guidelines, including fulfilling all responsibilities to the fund (e.g., submitting grades, meeting special conditions of the award).
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