Nonprofit Agencies

The Community Foundation for Southeast Michigan helps nonprofit agencies build endowments and plan for a stable and secure future.

The Community Foundation for Southeast Michigan helps nonprofit agencies build endowments and plan for a stable and secure future.

Nonprofit Agency Endowments

Public charities throughout southeast Michigan can turn to the Community Foundation for Southeast Michigan for many services. There are many advantages to working with us, due to the scope of resources and expertise we offer.

The Community Foundation advocates endowment-building because this source of permanent capital helps organizations plan for a stable and secure future. More than 190 nonprofit organizations are already building endowments with us to benefit their organizations. Their endowment funds provide these organizations with a reliable, ongoing source of financial support. We enhance their efforts by leveraging our expertise, systems and excellent financial management and oversight.

The Importance of Endowment

Endowment funds provide a source of ongoing annual financial support to address charitable causes. This source of funding can be invaluable in uncertain economic times when other support may no longer be available. During stronger economic periods, an endowment can provide funding to expand support and act as seed money for the development of new programs and services.

Endowment also provides intangible benefits. Giving to an agency’s endowment creates the opportunity for donors to leave a lasting legacy of support. A nonprofit organization with an endowment is sending a message to its donors that the organization will be here fulfilling its mission for decades to come. An endowment can also provide financial security to those organizations taking on new challenges and seizing new opportunities as they arise.

What is an Endowment?

An endowment is a pool of assets – a portion of which is made available for charitable purposes annually. The remaining assets and investment returns are retained in the endowment to provide for growth of the endowment over time. An increasing amount of support will be available from the endowment over time as it grows.  Historically, endowments were defined as funds that only expended their “income” for charitable purposes. This “income” definition is now outdated as it does not reflect current investment management philosophies or could lead to a belief that no or limited funds are available from the endowment. Rather, modern endowment management makes a “portion” (not limited to “income”) of the endowment available to support the charitable causes of the organization.

Why Build Endowment with the Community Foundation?

It’s our mission! The Community Foundation exists to create a permanent source of community capital benefiting the residents of southeast Michigan in perpetuity. Nonprofit agencies that build endowment with us benefit from distinct advantages over agencies that are building endowments elsewhere:

  • Reduced overhead and administrative costs. The Community Foundation handles all gift processing, record keeping, tax reporting, administrative services and audits.
  • Professional investment management of the endowment, overseen by our Investment Committee and consultants.
  • Expert investment oversight – at reduced investment costs – by leveraging existing Community Foundation systems and the “buying power” of our entire endowment investment pool.
  • Competitive investment and administrative fees through economies of scale, due to the size and breadth of the Community Foundation
  • Public visibility of your organization’s endowment through publications such as our Annual Yearbook and social media.
  • The ability to provide special recognition for donors who wish to create a named fund for your nonprofit.
  • Easy acceptance of all types of gifts including cash, marketable securities, real estate, private business interests, insurance and other complex or non-cash assets.
  • Technical assistance with major and planned gifts that benefit the endowment.
  • Planned gift options, including charitable gift annuities, which allow donors many options for supporting endowment funds.

How Endowment Increases Donor Satisfaction

Donors want to see their contributions benefit your nonprofit and grow over time. The Community Foundation helps you and your donors by:

  • Developing and monitoring an investment program guided by an expert volunteer committee and professional investment counsel.
  • Providing an annual Community Foundation investment briefing for agencies and donors.
  • Assisting agencies in the marketing of tax and planned gift opportunities.
  • Providing support to a donor’s professional advisor to facilitate gift planning.

Ongoing Administrative Services Detail

The Community Foundation is responsible for the administration of the endowment – which frees the nonprofit agency from the costs and hassles of gift processing, investment and takeout administration, and other record keeping. Here’s how it works:

  • Annual distributions are made by the Community Foundation from the endowment to the nonprofit agency.  In most cases, these annual grants are for general operating support.
  • The distribution is 4.75% of the trailing twelve calendar quarter average value of the endowment determined each December 31.
  • The amount and computation method are reviewed annually and subject to change by the Community Foundation’s Board of Trustees.
  • The endowment fund receives its share of the investment return of our endowment investment pool which is designed to grow over time.
  • Contributions to the fund will support the nonprofit agency in perpetuity – or, in the event the agency ceases to exist or loses its tax exempt status, similar nonprofit agencies.  This assures donors to the endowment that the programs they want to support will be supported now and in the future.
  • Assets contributed to the endowment become permanent assets of the Community Foundation though their use is dedicated to support the nonprofit agency.
  • The Community Foundation collects a total fee of approximately 1.2% annually from the endowment that covers all administration (.5%) and investment (.7%) expenses – an extremely attractive total fee compared to the costs of independently managed endowments.  Earnings for endowment funds are posted net of fees.
  • The Community Foundation can support many fundraising activities – but fundraising events (such as golf outings, dinners, etc.) may not be used to directly benefit the endowment fund.

If you are interested in learning more about the services the Community Foundation can offer to your organization, call us at 313.961.6675.

Agency Endowment Partners

Many nonprofits in Southeast Michigan are putting the power of a Community Foundation endowment to work for their futures. Please find a list of our current Agency Endowment partners by clicking here.

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Investment Performance

The endowment pool is managed with a long-term perspective where principal is preserved and enhanced over time. Total return, consistent with prudent investment management, is the primary goal.

Funds invested in the endowment pool are subject to a spending plan that makes a percentage of the Fund’s average market value available for grants each year.

The current target asset allocation of the Community Foundation’s endowment pool is as follows:

Endowment pool investment returns as of December 31, 2016, net of fees:

 Period Return (%)
 YTD 7.7
 1 Year 7.7
 3 Years (annualized) 2.6
 5 Years (annualized) 6.0

 

Creating a Fund

How To Get Started

Any 501(c)(3) public charity within southeast Michigan can establish an endowment fund at the Community Foundation in two simple steps:

  • Sign a fund agreement with the Community Foundation to establish the endowment or for a consultation, please contact our Philanthropic Services department at 313.961.6675
  • Make an initial $10,000 contribution, from your nonprofit agency or from a donor

That’s it! Your endowment is ready to receive additional contributions at any time, and in any amount.

Accounting

Nonprofits place their endowment funds with the Community Foundation for a variety of reasons, including investment expertise, efficiency, and access to planned giving advice and services. When nonprofits seek to place their assets with the Foundation, questions arise as to the appropriate accounting for this relationship.

The purpose of the document below is to provide nonprofits with a possible solution for accounting for their interest in the endowment funds placed with community foundations. As is always the case, each nonprofit entity should consult with its own auditors in determining the best solution for its needs. It should be noted that this paper speaks only to the accounting for endowment funds created at a community foundation by a nonprofit entity with its own endowment dollars. Donor designated funds held by a community foundation, which come directly to the community foundation from a donor and not through the nonprofit, are not covered. Our guidelines for accounting in nonprofit agencies can be found here.

Charitable Gift Annuity Program

In 2003, the Community Foundation for Southeast Michigan established a Charitable Gift Annuity Program to benefit the endowment funds of qualified nonprofit organizations. The program was created to support endowment building through planned gifts in furtherance of the Community Foundation’s mission to improve the quality of life in southeast Michigan.

Charitable Gift Annuity

This is an agreement between a donor and the Community Foundation (CFSEM). A donor contributes cash and/or marketable securities and CFSEM agrees to pay the donor and/or the beneficiaries (no more than 2 lives total) a fixed annuity payment for life. The donor gets an immediate income tax deduction. Upon the death of the last income beneficiary, 90% of remainder goes to the endowment fund benefiting the designated organization, and 10% to the CFSEM’s unrestricted endowment fund. The unrestricted endowment supports nonprofit organizations and programs throughout southeast Michigan.

Donors benefit from charitable gift annuity arrangements through an immediate income tax deduction. Also the donor and/or the beneficiaries retain the right to receive income from the gifted property in the form of an annuity payment (possibly higher than the income currently being generated by the gifted property) which is partially tax free. They also realize a deferral or avoidance of capital gains taxes. And they can be confident that CFSEM stands behind the annuity obligation.

Nonprofit organizations building endowment at CFSEM are eligible to participate in our Nonprofit Agency Charitable Gift Annuity Program if their endowment fund balance is $100,000 or more, they have one full time development person, they attend training on gift annuities and agree to only use CFSEM approved materials in connection with the gift annuities.

The nonprofit’s role is to identify those prospects who would benefit from this form of planned giving. Most utilize their volunteers and planned giving committee to assist them in identifying prospects. Customized marketing materials are available and complimentary.

CFSEM coordinates with the development staff to create a proposal when the organization has an interested donor. CFSEM handles all the paperwork. We will provide illustrations, disclosures and agreements. We take care of the gift processing and tax acknowledgments. We make the annuity payments and send annual tax information to the annuitant.

The Nonprofit Agency Charitable Gift Annuity Program of the Community Foundation for Southeast Michigan can help your organization leverage its development resources and planned giving program. Working together we can secure planned gifts that build the endowments of our area nonprofits.

 

Managing Your Fund

The Community Foundation for Southeast Michigan provides an online service for nonprofit agency partners. They can view fund balances as well as grant and gift transactions, with information updated daily. Click here to log in to Agency Central.

Contact

For more information and to learn more about how your nonprofit agency can benefit from the support offered by the Community Foundation for Southeast Michigan, please contact:

Philanthropic Services
Community Foundation for Southeast Michigan
333 W. Fort Street, Suite 2010
Detroit, MI 48226
313.961.6675
Fax 313.961.2886
www.cfsem.org