COMMONLY ASKED QUESTIONS AND ANSWERS
What is a community foundation?
No two community foundations are alike, and yet they share common characteristics. Community foundations are a collection of individual funds, invested together to benefit a broad range of community needs. They are shaped by local traditions, history and culture and are designed to meet the needs in a defined geographical area. Community foundations do not champion one cause over another, but rather work on behalf of the entire community. Their ability to meet the need(s) in their communities is limited only by available resources and the richness of their donors’ imagination.
What are the benefits of a community foundation?
Sometimes donors dream big and yet are confused as to the proper mechanism or process that will allow them to achieve their philanthropic goals. The primary benefit of a community foundation is the expertise, flexibility and ease it provides a donor to meet their goals. A donor can select, 1) when to give, 2) what asset is most appropriate to give, and 3) who or what their money will benefit. There is very little paperwork and no need to set up a separate board of directors or go through the lengthy and expensive process of setting up a private foundation.
What types of funds does a community foundation manage?
Donor Advised Fund: A donor sets up the fund with a minimum gift and retains the right to actively participate in awarding grants.
Field-Of-Interest Fund: The fund is established to make grants only for specific types of programs, such as disadvantaged children, the elderly, or the performing arts.
Donor Designated Fund: The donor may name a specific charitable organization(s) to be assisted by distributions from the fund.
General Fund: The donor may choose to leave their gift unrestricted, allowing the community foundation to make grants to meet emerging needs of the community.
Why should someone invest with the Renton Community Foundation?
When a donor contributes to the Renton Community Foundation, they can watch their dollars grow, not just in dollars and cents, but in helping to grow a stronger community. Our donors invest with a purpose. They are our partners and together we strive to achieve high-impact philanthropy. As such, RCF remains current on the issues facing our community and serves as a “hub” of philanthropic information, where ideas are shared, needs are identified, and common agendas for the future are developed.
What is RCF’s Investment Strategy?
The goal at the Renton Community Foundation is to invest an ever-increasing pool of assets in a way that will maximize return while moderating risk. An investment committee made up of Foundation trustees and community leaders guides the Foundation’s investment strategies, making recommendations to the board on policy, strategy and management.
RCF purposely invests in a balanced portfolio (60% equity, 35% fixed income & 5% cash), giving us some insulation from market fluctuation.
Investments are made by professional money managers (currently the Harris Private Bank in Seattle) to ensure superior performance and adequate diversification. Donors and affiliates receive quarterly statements (that detail investment performance, earnings and fees), along with monthly balance statements.
What are the investment fees?
RCF keeps expenses low by spreading costs over its growing collection of funds, careful management and the use of volunteers. Small funds particularly benefit from pooling with our size and diversified portfolio. Each RCF fund pays a proportionate share of the investment management fee, which currently runs just under .8%. Administrative fees are in addition to this and are based on the size and type of fund. Currently administrative fees run between 1-3%, depending on the size of the fund and how much activity (number of contributions, number of grants, special projects) the fund generates.
How is the Foundation’s Operating Account (Fund) used?
The Operating Fund supports all operations of the Foundation, as well as the disbursement of annual grants made through the Circle of Giving. Largely a volunteer organization, currently RCF retains an Executive Director and has plans to hire a part-time support person.
Having professional staff allows RCF to maintain an active presence in the community, increase efficiencies, provide prompt response to inquiries, provide individualized attention to donors, maintain a consistent approach to policies and procedures, activate education and promotion plans, build a network of partnerships, help provide a consistent message to the community and liaison with other community foundations in the area.
Specifically, Operation Fund gifts help pay for community outreach, gift planning, and grant disbursement, all in an effort to broaden the base of donors in order to impact the quality of life in Renton.
What is the process to set up a fund?
Most donors don’t want to be burdened with complicated, legal proceedings in order to do something good for their community. The process of setting up a fund with a community foundation is simple. Donors can contact the Foundation by calling (425) 282-5199 or by emailing the Executive Director at email@example.com to schedule a meeting. For as little as $10,000, donors can establish a fund by filling out a “fund agreement” in which they designate how they wish the money to be used, what the fund will be called and who is authorized to request disbursements. Although we encourage donors to consult with their personal legal and financial advisors, the process can be completed within a day, pending formal approval by the board. There are no ongoing administrative details.
Donors can name the fund in honor of a loved one or the cause they intend to benefit, and they can retain the right to be as involved or un-involved as they wish. While fund balances must remain at or above the $10,000 threshold, once the fund is established, donors can continue to make contributions and/or encourage friends and colleagues to contribute to their fund.
A donor wishing to set up a private foundation or non-profit corporation would have to recreate services provided by the Foundation. The price tag, in terms of time and cost, could be prohibitive. With RCF, their fund will share the benefits of a knowledgeable staff, excellent financial management and a closely monitored investment strategy.
What types of gifts can RCF accept?
RCF can accept most types of gifts, including cash, securities, life insurance policies, real estate and personal property, subject to Gift Acceptance policies of the Foundation. The Foundation also can accept remainder trusts, lead trusts, life estates and bequests.
What portion of the gift is used for charitable purposes?
In general, community foundations are very cost-effective, but determining what portion of a gift goes directly to charitable purposes depends on the gift itself. For instance:
Gifts made to an RCF fund are used exclusively for that purpose, minus any management fee or special handling fees.
Circle of Giving funds are spent according to recommendations by a ‘donor committee’. Therefore, a portion may be given to the Foundation for operations, while the rest is awarded directly to non-profit organizations and agencies in the Renton area.
All or part of any gift made directly to RCF’s Operating Fund is used to support operations and expand philanthropy in our area as a way to impact the quality of living.
Why does it make sense to invest with RCF?
There is a reason community foundations are the fastest growing segment of philanthropy in the U.S. They make sense. Think of it as a community savings account. Investing with RCF creates a “win/win” situation. Donors achieve their charitable goals, more donors become aware of how they can make a difference, and the increased giving makes a lasting impact on the local community.
Giving through a community foundation relieves donors of the administrative responsibilities associated of going it alone, while offering maximum flexibility, simplicity and security. A community foundation also teams the donor with a knowledgeable source of information to help match the donor’s gifts with the donor’s interests.
For donors, the Renton Community Foundation:
Provides a broad range of giving opportunities to meet donor interests.
Provides tremendous flexibility in setting up a fund.
Eliminates the set-up costs of a private foundation, IRS paperwork, or the need to establish a business license.
Eliminates administrative overhead and the need to establish a separate board of directors.
Provides access to community leaders and local professionals who have a deep understanding of local issues, nonprofit organizations and available resources in the community.
Provides the framework to award scholarships and effective grants.
For local non-profit agencies, the Renton Community Foundation:
Provides a lucrative investment tool without the headache of oversight management.
Provides broad exposure to potential new donors through our website, publications, seminars and community presentations.
Connects the affiliate to community leaders throughout the greater Renton area, helping to educate them on relevant causes and interests.
Offers expertise on fundraising, planned giving and non-profit management.
Provides a network of peer organizations through the Foundation Roundtable where information and expertise is shared for the greater good.
Provides access to a greater pool of donors as RCF meets its goal to increase philanthropy in the Renton area.
How does RCF differ from the United Way or other charitable organizations?
RCF is not in competition with other local not-for-profit organizations. Instead, we work to support and enhance our local partners. How do we do this? While most non-profit organizations have a very specific mission, community foundations have broad missions and are thus free to make grants to address any charitable purpose. For instance, in ten years of operation, RCF has distributed more than $2 million to a variety of local charities.
Additionally, most non-profits conduct annual fundraising programs to support their operations. Although community foundations must also fund operations, they typically do so through management fees, interest income, operational endowments, small special events and working directly with major and/or planned gift donors.
What are the tax benefits of investing with RCF?
RCF is a tax exempt, 501(C) 3 organization. All contributions to RCF are tax deductible to the extent permitted by law. In addition, RCF can accept specialized forms of giving such as gifts of stock, bonds, mutual funds and real estate. RCF can also work with donors to set up planned gifts, which allow the donor to achieve a tax deduction and a stream of income.
If you have additional questions, please contact RCF at (425) 282-5199 or by visiting the website at www.rentonfoundation.org.