The Nebraska Community Foundation works with community, organizational and donor-advised affiliated funds serving 250 communities located in 80 counties. NCF and its affiliated funds have reinvested $269 million in Nebraska since 1994.
A typical affiliated fund at the Nebraska Community Foundation will have several “accounts.” These accounts are used to track contributions for different purposes, since one key requirement for charitable organizations is to ensure that contributions are spent in accordance with donor intent. Maintaining records that show donor intent has been followed is important not only for compliance with the law, but for maintaining credibility and trust with donors to your affiliated fund.
For example, if a donor gives money to be used for scholarships for nursing students, that money cannot be combined in an account with contributions for the library; or even with contributions for other types of scholarships.
Your Fund Advisory Committee should have a strategy that includes knowing the types of activities your affiliated fund plans to support. In that way, you will have a frame of reference in determining whether to establish new accounts for your affiliated fund for specific purposes.
When establishing a new account, consider whether the account should be “non-permanent” or “permanently endowed.” The key difference between these two types of accounts is whether the full balance of the account can be expended. These types of accounts are described below.
The full balance of contributions and investment earnings in a non-permanent account may be spent. A non-permanent account is used for an ongoing activity or for a one-time project. Your affiliated fund’s general account is a non-permanent account. Other examples of accounts for ongoing activities would be a community leadership program or support of school activities. One-time projects might include such things as raising funds for the start-up of a nonprofit child care center or the renovation of a public facility.
Non-permanent accounts are invested in a bank account, and in some circumstances may be invested in bank certificates of deposit. Safety of principal is the primary investment objective for non-permanent accounts.
An endowment is a permanent account whose assets are invested to generate an ongoing source of income year after year. Investment earnings from the endowment are used to provide ongoing support in perpetuity for a particular purpose, activity or project. The Board of Directors of the Nebraska Community Foundation, in keeping with its fiduciary responsibility, establishes a payout rate each year for how much can be spent from permanently endowed accounts. The payout policy is designed to ensure that the purchasing power of the endowment accounts is maintained into perpetuity – so that both the endowment balance and the payout will increase over time.
Permanently endowed accounts can be used for many purposes. An unrestricted endowment is particularly valuable for community-based affiliated funds, because the needs of the community will change over time. Your Fund Advisory Committee will determine the purposes for which grants will be made from the unrestricted endowment each year. Permanently endowed accounts are often used to support HomeTown Competitiveness activities in the community, scholarships, libraries, hospitals and other activities and institutions.
Permanently endowed accounts are invested in a diversified mix of equities, fixed income securities and cash. NCF offers two different asset allocation models that affiliated funds may choose from for each of your endowments. The primary investment objectives for permanently endowed accounts are to preserve the purchasing power of the endowment, invest in diversified portfolios using a long-term investment horizon, and provide a stable stream of income and/or capital appreciation to meet the grantmaking needs of our affiliated funds. See the Investment Choices for Permanently Endowed Accounts page for more information on how permanently endowed accounts can be invested.
Rita Shimmin, a retired school teacher, grew up in Hershey and taught school in Elsie for three years before moving to Ogallala, where she taught high school business classes for 35 years. Rita worked with NCF’s Jim Gustafson to establish a charitable gift annuity which will benefit the Keith County Community Foundation Fund in the future.Read more →