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.
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.