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CREATE AN ORGANIZATIONAL FUND |
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How to Create an Organizational Fund with the Humboldt Area Foundation (HAF)
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Several local non-profit agencies, schools and faith-based
organizations have started their own organizational funds to support
and sustain the work they do.
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These funds can be used to help cover
basic operational costs, pay for special projects and/or fundraise for
a capital campaign. They offer a new option for current and potential
contributors to your organization.
An organization may create a fund with a minimum gift of $2,000. However, HAF asks the organization to reach a minimum fund balance of $10,000 within five years.
Creating the fund
First, please read “Information about Organizational Funds,” to make sure that creating a fund is the right thing at the right time for your organization.
If it is, the donor services staff looks forward to working with you to define and describe your new fund. With your instructions, we will compose a “new fund agreement letter” that tells the Foundation how to administer the fund in accordance with your intentions as the years go by. You can make changes in the agreement at any time, simply by notifying the Foundation in writing.
We will help you write a description of your fund and include it each year in the HAF Yearbook. We also would be glad to include your logo. The Yearbook is distributed in November to approximately 8,000 people throughout Northern California and is a good marketing tool for your organization.
To set up a new fund, you’ll need to decide:
- What will be your fund’s exact name or title?
- What type of fund will it be?
- What will be the fund’s purpose?
1. Naming your fund
For marketing purposes, it is a good idea to include your organization’s name in the fund title, preferable at the beginning.
2. Types of funds
Most organizational funds are endowment funds. That means that none of the principal balance and only a portion of the income earned from investment is spent each year. The fund continues to grow and can support the organization forever.
However, some organizations choose to establish expendable funds from which a portion of the principal balance as well as the available income can be spent to accomplish the funds’ purposes. As an example, a non-profit organization might create an expendable fund to build a new building.
If the organization itself establishes the fund, it is called an organizational endowment (or expendable) fund. If one of your supporters creates the fund to benefit your agency, it is called a designated endowment (or expendable) fund.
3. Fund Purpose
Do you want your fund to support the ongoing work of your organization? Or, are you saving for a specific goal, such as a new building? Defining and describing your fund’s purpose will give potential donors the information they need.
Next steps
After you’ve had some time to think about this, give us a call or stop by to talk with staff. We will draft the new fund agreement letter and send it to you for your review. When it’s just the way you want it, we will formalize it as an agreement with your signature and the signature of HAF’s Executive Director, Peter Pennekamp. We will ask for a copy of your IRS Tax Exemption letter and a copy of your Board minutes in which the Board voted to establish the fund with HAF
Any questions? Please feel free to get in touch with the HAF Donor Services Director,
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. Thank you for your interest. We look forward to working with you.
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Services for Organizational Funds
- Financial statements for each fund, including investment activity and itemized lists of donations and disbursements
- Acknowledgment of gifts made to the fund, receipts meeting current IRS regulations, and thank you letters to all donors
- Independent audit of all financial transactions
- Required IRS annual tax returns filed on behalf of the fund’s activity
- Inclusion of fund description in HAF’s Yearbook with circulation of 8,000
- Upon request, assistance with press conference at fund’s inception and/or press release at time of grant award
- Advice on grant-making procedures and guidelines.
- Professional charitable estate planning assistance for potential donors to the organizational fund
Investment Management
The
Humboldt Area Foundation (HAF) currently pools over 450 funds with
assets that total approximately $52 million. Investing on a pooled
basis produces significant economies of scale, including: (a) enhanced
diversification of assets across investment styles and money managers;
(b) enhanced access to money managers that might otherwise be
unavailable due to account size minimums; and (c) reduced costs due to
the application of size-sensitive fee schedules to an expanded asset
base.
HAF participates in the American Funds Community
Foundation Program. Specific American Fund mutual funds are joined
with selected funds from the mutual fund family of DFA (Dimensional
Funds Advisors) to acquire optimum results. Investment services have
been expanded to include the services of local investment advisors.
The
Humboldt Area Foundation also invests some expendable funds in low-risk
or non-risk investments. These returns vary by the month.
Asset Allocation
The Humboldt Area Foundation's assets are allocated as follows:
15%
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International Equities |
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30% |
Fixed Income Fund |
50%
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U.S. Equities |
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5%
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Real Estate Securities |
Investment Returns
This asset allocation has produced the following total net returns. All returns are reported net of investment fees.
1999
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16.3%
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2003
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3.06%
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2000
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9.8%
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2004
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17.355%
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2001
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.94%
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2005
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11.19%
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2002
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-4.93%
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2006
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12.45%
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Administrative Fees
Annual fee schedule for agency endowments:
- 1.5% of the principal balance for funds with a balance less than $100,000
- 1.0% of the principal balance for funds with a balance of $100,000 - $500,000
- .75% of the principal balance for funds with a balance over $500,000
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