Index of Fund Options
What are the types of funds available at the Community Foundation?
There are many ways in which donors wishing to gift to The Community
Foundation of Prince Edward Island can put their contribution to work for
the benefit of their community. See a detailed description of each below.
- The Community Fund
- Named Fund
- Field of Interest Fund
- Designated Fund
- Donor Advised Fund
- Scholarship and Bursary Funds
- Operating/Administrative Fund
- Flow-through/Temporary Fund
- Agency Endowment Fund
- Managed Fund
- Memorial Fund
- Corporate Fund
The Community Fund
What it is:
- The Community Fund is held for general charitable purposes, enabling
the foundation to respond to a broad range of community needs and
opportunities.
- Grants are made in any area of philanthropy such as health, education,
the arts, the environment and social services. It is also referred to as
unrestricted, undesignated or discretionary funds.
How it works:
- Donations of any size are made to the Community Fund. The Board of
Directors chooses the recipients of the income based on the current needs
of the community.
Advantages:
- This all purpose fund is the most flexible for responding emerging
charitable needs.
- It is a good choice for donors who recognize that community needs and
opportunities change over time.
- Gifts can be made as a named fund within the Community Fund during a
donors' lifetime or in their will.
- This fund is also useful for donors who "just want to help their
community". By contributing to the Community Fund, donors can be assured
that their gift will always be used to meet vital needs, improve the
quality of life in the community, and respond quickly as needs change in
changing times.
Disadvantages:
- Donors are not consulted as to which agency their donation supports.
Example:
- Henry Brown has lived and worked all his life in his community. He has
been active in a number of ways including serving on Boards of several
organizations. His parents were also long time residents and community
supporters. Henry would like to memorialize his parents in a meaningful
way. He set up the John and Helen Brown Memorial Fund, as a named fund of
the Community Fund of his community foundation, using a block of stock he
inherited from his parents. Henry has also included a bequest in his will
to establish his own named fund, to be used for general community
purposes.
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Named Fund
What it is:
- The Community Foundation offers donors of significant gifts an
opportunity to be recognized in perpetuity through a fund named for the
donor, family, corporation, association, deceased person, honoree, event
or other entity. Generally there is a minimum amount required to establish
a named fund. The purpose of the fund may vary depending upon the wishes
of the donor(s) or honoree.
How it works:
- The fund is created by an individual of family. Often the fund is held
within the Community Fund allowing the Board of Directors of the Community
Foundation to choose the recipients of the income; however, a named fund
can also be set up within a field-of-interest or as a donor-designated
fund. Often there is a minimum amount to create a fund, normally $5000 or
perhaps $5000 over five years.
Advantages:
- This fund offers recognition and perpetuity to the named person or
entity.
Disadvantages:
Example:
- The local college contributed $20,000 to the Community Foundation in
honour of the retirement of their long time chairperson. Upon exploration
of the interests of the former chair, it was decided that the "John G.
Smith" Fund would support groups working with seniors.
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Field of Interest Fund
What it is:
- Funds intended to provide support for a general area (such as
education or the environment) without limitation to a specific
organization or beneficiary are called field-of-interest funds.
How it works:
- Field-of-interest funds can be as broad or as narrow as the Board of
Directors wish.
Fund options may include:
- Education
- Health
- The Arts
- Environment
- Social Servcies
- Youth
- Seniors
Advantages:
- For donors who want to do some good in a particular field that is
close to their heart but do not want to commit their money to just one
organization.
Disadvantages:
- Donors cannot choose the exact charity they wish their funds to
support.
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Designated Fund
What it is:
- Designated funds support particular agencies or organizations, as
named by the donor. Income is disbursed at least annually to the specified
beneficiaries.
How it works:
- The donor indicates, in writing, the names of the beneficiary
organization(s) to receive the annual income. The Foundation continues to
monitor the designated beneficiaries to ensure they are meeting the
original intent of the donor. If a charity significantly changes its
focus, or merges with another, or closes its doors, or the purpose it
serves becomes obsolete, the Foundation adjusts disbursements to the
nearest similar purpose to the original intent of the donor.
Advantages:
- The designated fund is a good fund for donors who have a strong
preference for one or more favourite charities or have been supporting
certain charitable organizations with annual gifts.
- A designated gift ensures these charities continue to receive support
for as long as they provide needed services in the community.
Disadvantages:
- This type of fund allows less flexibility to respond to new and
emerging needs than the unrestricted funds permit.
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Donor Advised Fund
What it is:
- This type of fund enable ongoing donor participation in the
distribution of income (and sometimes principal) from their fund.
How it works:
- The donor, or the donor and an advisory committee named by the donor,
give the Foundation recommendations on distributions from time to
time.
- An advised fund can also be set up in a will naming the advisor(s) who
will make recommendations on distributions from the fund, provided that
the Community Foundation has been consulted in advance and has agreed with
the provisions.
- In all disbursements, the chosen charity must be a registered
charitable organization. The purpose of the grant must be charitable. The
organization is reviewed by the Foundation to confirm eligibility.
- Often community foundations require that the fund becomes unrestricted
upon the donor's death.
Advantages:
- Wealthy families often face a myriad of charitable requests. With a
donor advised fund the donor can refer requests to the Foundation or
suggest the Foundation make payments to any charity he or she chooses, so
long as the proposed grants are for recognized charitable purposes.
Although the board of Directors has final say on all grants made, donor
advised suggestions are followed wherever possible. The Foundation offers
the added services of making sure the charity is above-board and actively
serving the public. On request, the foundation can identify worth
charities in a given field, locate information on charitable groups, and
evaluate the results of support given.
- Donor advised funds allow donors to professionalize their charitable
giving without the administration or costs entailed in running a private
foundation.
Disadvantages:
- This type of fund requires more hands-on help by the Foundation and
therefore, often foundations have a higher fund amount to initiate a donor
advised fund. Minimum funds vary from $10,000 - $25,000 and up.
- A portion of the investment income (10-25% depending on the size of
the gift) is usually negotiated for general purposes by the Foundation.
Otherwise there is virtually no benefit to the Community Foundation (other
than a small administration fee). The Foundation in essence then is simply
acting as a trustee company.
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Scholarship and Bursary Funds
What it is:
- These funds enable deserving students to continue their education.
Scholarships generally require a high academic standard while bursaries
focus on financial need and satisfactory academic progress.
- Donors can specify broad or narrow eligibility requirements, provided
they are fair and legitimate (within the human rights legislation). They
can be established for any level of education.
- Donors may specify the schools the students are to come from or the
ones they attend, choose afield of study, or require the recipient to
practice their profession in the community for a stated time.
How it works:
- Generally an independent committee (appointed by the Community
Foundation, with input from the donor) receives applications and makes
recommendations to the Board on award recipients. Award amounts may be
based upon eligibility criteria and other financial considerations,
including the size of the gift fund.
Advantages:
- Donors have an opportunity to assist individuals they may not
otherwise know about or be able to help. This type of fund also allows
donors to support their own school of learning or their chosen profession
at the same time as they support their local Community Foundation.
Disadvantages:
- Careful consideration must be given to the criteria when establishing
this type of fund, especially in smaller centres where the availability of
acceptable educational institutions or students may make the granting of
the award difficult.
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Operating/Administrative Fund
What it is:
- This fund is created to offset the operating and program expenses for
the Foundation.
How it works:
- Contributions to an operating endowment provide a source of income to
cover the operating costs for the Foundation.
Advantages:
- Donations to this fund assist the Foundation in covering expenses and
reduce the amount of annual fundraising required. As this fund grows, the
fees charged against other endowments for administration can be
reduced.
Disadvantages:
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Flow-Through/Temporary Fund
What it is:
- Flow-through funds are non-permanent, pass-through funds received for
distribution over a period of time or for a specific project.
How it works:
- For grant making, the funds are passed through the Community
Foundation to a charitable organization in the same manner as the income
of the Foundation's permanent designated funds.
Advantages:
- The donor receives an immediate tax deduction when the gift is made to
the Foundation, but distribution to designated beneficiaries can occur at
a future date.
Disadvantages:
- For the Community Foundation, pass-through funds do not help create or
grow the permanent endowment.
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Agency Endowment Fund
What it is:
- These are funds established by charitable organizations as permanent
funds to ensure an ongoing source of support for their programs and
operations. The agency transfers ownership of the fund to the Community
Foundation under agreement and the annual income is distributed to the
agency.
How it works:
- An agency creates a designate fund at the Community Foundation.
- The fund is owned by the Community Foundation, however, the income is
directed to the agency. Donors can make contributions to the fund through
the agency or directly through the Foundation.
- Often there is a minimum ($5,000-10,000) to open an agency fund.
Advantages:
- By placing an endowment fund into the Community Foundation investment
pool, the agency increase its opportunities for maximizing income while
reducing investment cost. The agency is relieved of the internal
accounting and reporting required as periodic statements on principal and
income status are provided by the Foundation. In addition, an annual audit
is performed by independent auditors as part of the Foundation's regular
audit procedure.
- By transferring ownership to the Community Foundation, the fund is
protected from encroachment by future agency boards. Community Foundation
ownership also provides added reassurance to donors that their gifts will
be held in perpetuity for exclusive use by the agency or for a similar
purpose should the agency cease to exist.
- Transfer of capital funds also removes the fund from the agency's
financial statement which may eliminate misunderstanding about the actual
funds available to the agency for immediate use.
Disadvantages:
- The fund is non-encroachable by the agency, even during times of
extreme financial need.
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Managed Fund
What it is:
- A managed fund is simply a fund entrusted to the Foundation for
investment management purposes only.
How it works:
- An established fund is transferred by the agency or owner of the fund
to be invested with the capital of the Community Foundation.
- Income is returned on a regular or periodic basis.
Advantages:
- This type of fund provides better investment return and lower cost to
the agency. It also relieves the agency of investment management
responsibility. The funds may be called at any time by the agency, subject
to a grace period of one to three months, allowing the agency to cover
unforseen expenses or cost overruns.
Disadvantages:
- Being able to withdraw the fund not only exposes the agency to loss of
protected capital but also may counter the intentions of the donors and
volunteer solicitors/Board members who assisted the organization to
accumulate the funds.
- Managed funds can put community foundations in a vulnerable position.
The foundation has no role in deciding whether or not the purpose for
which the funds are being withdrawn is valid. In addition, the community
foundation may have to sell investments at an inopportune time in order to
return cash to the agency. Because these funds are encroachable and do not
complement the Foundation's mission of building permanently endowed
charitable funds, managed funds are generally discouraged.
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Memorial Fund
What it is:
- Most people today, when faced with the death of a family member or
friend, prefer to provide some tangible support for charity rather than
receive a multitude of floral tributes. A memorial fund, established in
the name of the deceased, and supported by one large or many small gifts,
creates a legacy, a perpetual remembrance.
How it works:
- A memorial fund may be established at any time. For example, at the
time of death the family may ask for contributions to the Community
Foundation in lieu of flowers. If the donations received are beyond the
minimum amount, a named fund can be created. If the minimum amount is not
met, the funds are generally added to the Community Fund and the deceased
is listed in the annual report section about "Gifts in Memory". Sometimes
a family will add to a fund to bring it to the amount required for
naming.
- After the death, a family may approach the Community Foundation to
establish a fund in memory of their loved one.
Advantages:
- Regardless of when or how the fund is established, the purpose of the
fund may be general. Restricted, field-of-interest or designated.
Disadvantages:
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Corporate Fund
What it is:
- This is a fund created by a corporation to distribute gifts to the
community on an annual basis.
How it works:
- The corporation sets up a fund at the Community Foundation.
- Depending on the size of the fund it can be created as a named fund
within the Community Fund, a donor advised fund or a designated fund. The
corporation is recognized as the donor for all grants made from the
corporate fund.
Advantages:
- Although yearly contributions to a corporate fund may be uneven due to
fluctuations in profit, distributions can be held at a consistent level.
Businesses can also be assisted in evaluating the many charitable requests
they receive and in administering funds for special purposes such as
scholarships and awards.
Disadvantages:
- The initial contribution to establish this fund may be problematic for
small businesses. Meeting the minimum amount for a named fund may be met
by contributing over a period of years.
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