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© 2013 Greater Everett Community Foundation
2823 Rockefeller Avenue, Everett - Mailing address: PO Box 5549, Everett, WA 98206
(425) 212-4056 - FAX: (425) 212-4059
STATUS AND PURPOSE OF FOUNDATION. The Greater Everett Community Foundation (GECF) is a publicly supported charitable organization that is exempt from taxation under section 501(c)(3) of the Internal Revenue Code. All Fund Agreements must be interpreted in a manner consistent with this status. The mission of the Greater Everett Community Foundation is to work in partnership with donors to strengthen communities throughout Snohomish County by: building permanent charitable funds, connecting donors to charitable causes they care about, making effective grants, and providing leadership to address community issues. Because the Foundation expects to operate in perpetuity, wise stewardship of the funds entrusted to it is essential to the Foundation’s mission.
TYPES OF FUNDS
DONOR ADVISED FUNDS. Donor Advised Funds are established by individuals, couples, families or businesses that want to give significant charitable gifts to GECF now, while retaining the right to play an active role in the distribution of their gift over their lifetimes.
A GECF Donor Advised Fund is typically started with a minimum $25,000 contribution in cash, stock, and, in some cases, other assets. Additions to the fund can be made at any time, by anyone.
Donor Advised Funds can be permanent (endowed) funds, or non-endowed. Non-endowed funds are spent out in grants typically within one calendar year of the gift receipt.
NAMING THE FUND. Donor advised funds can carry the name of the donor, family, company, or someone the donor wishes to honor. All grants from the fund are made in the name of the fund. Donors who prefer anonymity can choose names that reflect their funds’ charitable purposes.
GRANTS. The Donor Advisor may from time to time, recommend distributions/grants from the Fund of $250 or more. The Foundation’s Board examines all requests for distribution and, in its sole discretion, may accept or reject, in whole or in part, any recommended distribution. All distributions recommendations must be accompanied by a written request. Grants will only be made to non-profit 501(c)(3) organizations or public purpose civic groups and may not be used for memberships, pledges, sponsorships, tickets or for any purpose that would provide benefits, goods or services to the fund’s donors, advisors or related parties. Grants may not be used for lobbying, political contributions, or to support political campaign activities or for any purpose inconsistent with the Foundation’s tax-exempt status. It is illegal to award grants from donor advised funds to individuals or to seek expenses reimbursement through a donor advised fund. GECF staff generally process, obtain Board (or Executive Committee approval) and mail grant checks within two weeks of the grant request being received.
CURRENT GRANT POLICY. Our grant distribution goal is to provide a consistent and stable flow of grants. The annual grant expenditure allowed will be 5% of the endowed Fund balance. The allocation will be made each January based upon the average of the prior 3-year end Fund balances. A minimum of $500 will be distributed in annual grants from funds that have achieved a minimum balance of $25,000, and that have achieved four quarters of earnings. In the event of a decline of fund values due to market downturn or other factors, subsequent earnings will first be applied to restore the principal of the fund.
FEES. Refer to attached fee schedule.
REPORTING. GECF staff prepares and mails quarterly fund statements to donor advisors and to designated fund representatives. In addition, GECF staff issue an annual report to all donors and to the community at large.
ADVISOR SUCCESSION. GECF Donor Advised Endowment Funds may permit donors to name their children as successor advisor(s). Also with the consent of GECF’s Board, advisors other than children may be named, without succession rights. If a donor advised fund is established through a bequest, the fund may exist for the lifetime of the designee-advisor. The donor will document in writing who will act as the designee-advisor. Upon the death of the donor advisor or their approved nominee, or in the event the above is no longer willing or able to advise on a fund’s distribution, the GECF Board will assume responsibility for grant-making.
COMMUNITY FUNDS. Donors who wish to create a charitable fund but who do not want any advisory responsibility can open a Community Fund. Community Funds can be endowed or not. Monies are granted annually at the discretion of the Foundation based on community needs and opportunities. Community Funds are assessed fees based on the same schedule as Donor Advised Funds.
FIELD OF INTEREST FUNDS. Donors who want to support organizations working within a given geographic area or field of interest but who do not want advisory responsibility can open a Field of Interest Fund. When completing the Fund Agreement, GECF Staff will specify the area of interest as expressed by the donor. As requests for funding from organizations working in the area of interest are received, or as GECF Staff learn of funding opportunities in the community that fall within the area of interest, GECF Staff will bring to the Foundation’s Grants Committee and Board recommendations for grants from the Field of Interest Fund. Field of Interest Funds can be endowed or not, and are subject to the same administrative fee schedule as Donor Advised Funds. If desired, the donor can request information from GECF staff periodically about where grants from the fund have been awarded.
DESIGNATED FUNDS. Donors who support one or more specific nonprofit organizations in the community can insure that the organizations will receive support as long as they continue doing good work in the community by opening a Designated Fund. Donors identify the specific organizations they wish to support on the Fund Agreement Form, along with the amount of funding they want each of the organizations to receive each year. Foundation Staff does the rest of the work by scheduling annual grant payments to the designated organizations. Designated Funds are subject to the same administrative fee schedule as Donor Advised Funds.
SCHOLARSHIP FUNDS. Donors who want to help young people achieve their educational goals can establish Scholarship Funds. Foundation Staff and Board will work with the donor to develop objective and non-discriminatory scholarship award procedures and appoint a committee to make scholarship award selections. The procedures and the committee will be reviewed and approved annually by the Foundation’s Board. Scholarship funds are subject to the same fee structure as donor advised funds.
All scholarship awards must comply with restrictions set forth in paragraphs 1, 2 or 3 of IRC 4945(g) as follows:
Paragraph (2) sanctions grants that are prizes or awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary or civic achievement. If the recipient is chosen from the general public, he or she must be selected without any action on his or her part to enter a contest or proceeding, and the recipient must not be required to provide services as a consequence of receiving the award.
Paragraph (3) permits grants to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific or other similar capacity skill or talent of the grantee. This is the broadest category and covers, for example, awards to artists to create works of art and some scholarships that do not fit under paragraph (1).
AGENCY ENDOWMENTS. Charitable organizations or non-profit agencies committed to providing services over a long period of time might want to consider building an endowment. An endowment is an important statement to your public that you are planning for your future and that you intend to be around for a long time. Many organizations find having a structured endowment program not only attracts larger planned gifts, but also serves as a good way to guarantee that some or all of the organization’s operating expenses will be covered by a percentage of the earnings the endowment realizes each year. Foundation staff will work with the agency to set up periodic payments back to the organization to best meet the organization’s needs.
DONOR INTENT. GECF is committed to carrying out donors’ charitable interests in perpetuity. As funds are created, GECF staff adds notes both in the fund file and in the FIMS database regarding donor intent. Should a Field of Interest or Designated Fund’s purpose become outdated by time (for example, if a recipient organization ceases to exist), the Board of Directors exercises its “variance power” to redirect the fund to the most closely related use, thereby assuring donors that their original intent will be honored in perpetuity despite changing societal circumstances.
INVESTMENTS. The Foundation’s investment goal is to earn through a combination of appreciation and income an annual return of at least 7-9%. Endowment funds will be invested according to the Foundation Investment policies. Investments are subject to market and interest rate fluctuation risks, and any gain or loss generated by the investments will be credited or charged to the Fund. Non-endowed funds do not receive interest or earnings. We will give out complete copies of the Investment Policy Statement upon request.
GIFTS. All gifts made to any fund(s) administered by the Greater Everett Community Foundation are recorded and acknowledged in writing generally within three days of their receipt.
DONOR-INITIATED FUNDRAISING. The Greater Everett Community Foundation applauds efforts of fundholders and donors that result in gifts to GECF Funds. However, a number of significant tax and accounting issues arise and need to be addressed prior to any public fundraising for any component funds of the Foundation. Failure to understand these issues can result in unintended tax consequences for donors and penalties or the possible loss of non-profit status for the Foundation. It is imperative that the following regulations are followed.
FOUNDATION APPROVAL OF EVENTS. Before undertaking public fundraising events, the fundholder must define in advance to the Foundation each program, event or other effort to raise money for the Fund. The fundholder should submit a written proposal and attain advance approval from the Foundation. The fundholder can then proceed according to the guidelines offered herein. All uses of the Foundation’s name in advertising and promotion must be approved in advance by the Foundation. All fundraising materials should make clear, where applicable, that funds are being raised on behalf of rather than by the Greater Everett Community Foundation. An administrative fee may be charged if extra administrative services will need to be expended by the Foundation; whenever it is determined that GECF staff will be required to spend extra time processing large numbers of gifts for a fund, the Foundation will charge a 10% fee on all gifts generated through a fundraising event.
RESPONSIBILITY OF THE GREATER EVERETT COMMUNITY FOUNDATION. The Foundation will be responsible for:
RESPONSIBILITIES OF FUNDHOLDER. The Fundholder will retain responsibility for all public fundraising events and matters related to them including:
PAYMENT OF EXPENSES. The Fundholder will be responsible for all expenses and maintain appropriate financial controls and records related to fundraising events. The Fundholder will establish a budget and submit it to the Foundation prior to all events. Arrangements for payment of expenses associated with the event must be discussed prior to the event. Regardless of the arrangements, invoices and/or original receipts must be provided to the Greater Everett Community Foundation for our record keeping.
DESIGNATION OF CHECKS AND RECEIPT OF CASH. Checks related to the event must be made payable to the component Fund of the Foundation. Cash receipts are to be deposited intact. That is, cash receipts are not to be used to pay expenses, and then the net cash amount deposited. All proceeds, checks and cash, must be delivered to the Foundation along with an accounting of all monies received within one week after the fundraising event.
TAX REQUIREMENTS AND ACKNOWLEDGEMENTS. The IRS has imposed strict requirements which impact any fundraising. If the steps outlined below are not taken, Donors will be denied a tax deduction; the Fundholder(s) might find themselves unexpectedly subjected to tax on the funds they raise; and either the Community Foundation or the Fundholder(s) might be subjected to penalty.
All donors will need a written acknowledgement from the Foundation in order to claim a tax deduction for the contribution. GECF will provide the appropriate acknowledgement to the Donors, but we require certain detailed information in order to do so. Specifically, the Fundholder must provide the Foundation with:
If the Fundholder(s) provide goods or services in exchange for a donation, certain disclosures are required to be made upon solicitation. For example, if the group is sponsoring a dinner, the donor can only deduct the excess of the ticket price above the fair market value of the dinner. This limitation on the deduction, known as a “quid pro quo disclosure”, must be disclosed at the time of solicitation. Disclosure on the ticket of the event is a typical method for making this disclosure.
The Greater Everett Community Foundation will assist the Fundholder(s) in determining the fair market value amounts and the appropriate disclosure language for the event. However, Foundation staff will have to work with the Fundholder(s) prior to the solicitation activity, and will need information pertaining to the event such as the ticket prices, and values of the goods or services donors are to receive. The Fundholder(s) need to see that the required quid pro quo disclosures are made.
Raffle tickets are not tax-deductible. This must be stated clearly on the face of distributed tickets.
Rummage Sale purchases are not tax-deductible.
Auctions – Legal counsel for the Foundation shall review, on a case-by-case basis, any proposed ideas for an auction. At that time, tax deductibility of items will be determined.
LIABILITY INSURANCE AND LIABILITY FOR LOSSES. The Fundholder(s) will contact the Foundation prior to having a fundraising event to assess the need to secure liability insurance for them and for the Foundation. Insurance coverage must be reviewed and approved by the Foundation.
The Fundholder(s) will be responsible for all losses incurred by events. The Foundation will not be held responsible for such losses. The Foundation may require the Fundholder(s) to purchase a letter of credit or provide a written personal guarantee.
FUND TERMINATION. In order to carry out its policy of consistently distributing charitable dollars to the community, the Foundation will review periodically the grantmaking activity of every advised fund. If a fund has failed to make distributions commensurate in size with the Foundation’s spending policy over a two-year period, the Foundation will contact the advisor(s) to discuss this situation and come up with a plan for distributing grant funds. In the event that the advisor(s) cannot be located or is unresponsive, the balance of the fund may be used to support the Foundation’s Community Grantmaking Program.
All funds held by GECF are component funds of the Foundation and as such are subject to the terms and conditions of GECF’s By-laws and Articles of Incorporation.
RIGHT TO AMEND POLICIES. These policies are current as of the effective date shown below. The Foundation reserves the right, however, to revise or rescind these policies at any time, with or without .