Since 1983, the Catholic Community Foundation has provided an invaluable opportunity for organizations to leave a legacy of giving that will support future need in perpetuity. As you may or may not know, the Foundation currently manages endowment funds for 150 agencies, including 70 parishes and 41 schools within our Diocese. This represents approximately 40% of our total assets under management.
Below are answers to some of the most frequently asked questions about Endowment Funds and how their benefits might benefit you now and forever…
What is an Endowment Fund?
An endowment is a perpetual fund. Literally, it lasts forever. The principal amount is never spent. The initial and additional funds contributed to the endowment are invested, and the earnings are distributed for charitable purposes. Some say that once you put money into an endowment, “you can never touch it.” (This refers to the “corpus,” or principal and is essentially the funds that establish or increase the endowment.) However, since the fund lasts forever and is always generating income, it is more accurate to say, “You are always touching it!”
What is endowment income?
Endowment income is the amount of income available to be distributed to support charitable works. In this circumstance, “Income” is defined as: Interest + Dividends + Realized and Unrealized Gains/Losses + Accrued Income – Expenses.
Can we set up "sub accounts" for different purposes, such as a fund for scholarships, a fund for equipment, and a fund for athletics?
Yes. This can be a particularly effective idea for marketing the existence and benefits of the endowment, as well as in meeting donor desires in regard to how their contributions are used.
How is an endowment different from a "rainy day" fund? (Related question: Suppose we deferred earnings for several years, could we take all of the deferred earnings in one year instead?)
A "rainy day" fund is certainly a good idea. However, an endowment is a different vehicle for a different purpose. An endowment provides perpetual income, and you would not be able to defer earnings to take a windfall in a later year.
How much does it cost to have an endowment fund?
Since the funds are essentially "pooled" for investment purposes, all participants benefit from the economy of scale. In other words, each endowment, regardless of size, enjoys the benefit of low costs associated with a portfolio of over $100 million. Currently, management, administration, and investment fees are approximately 125 basis points (1.25 %), with a minimum annual fee of $250.00. This represents ALL costs, and these fees are charged directly to the fund on a quarterly basis.
Who invests the money?
The Foundation participates in the Diocesan Central Investment Committee, a coalition of several diocesan organizations including such groups as the Society of St. Vincent de Paul and Catholic Cemeteries. Two delegates from each organization serve on this committee. The committee is responsible for stewardship of the entire portfolio.
At present, Fund Evaluation Group, Inc., out of Cincinnati, Ohio serves as consultant to the Investment Committee. Marshall & Ilsley Trust administers the funds. Individual fund managers are as follows:
Gardner Lewis and Metropolitan West (Large Cap. Equity)
Vanguard (Mid Cap. Equity)
Trans America Clover Capital (Small Cap Equity)
Europacific and DFA (International Equities)
Allegiance Capital/ Pimco (Fixed Income)
How much input do we have in determining how our fund is invested?
The Foundation has determined that the investment strategy for a long-term fund such as an endowment will be 80% securities and 20% fixed equities.
How is the amount of money to be disbursed calculated?
The Foundation uses a total valuation methodology in calculating distributions. The value of the fund on the closing date of the most recent twelve consecutive quarters prior to the completed fiscal year is averaged, and a percentage is applied (usually 4%) to that average to calculate the disbursement. The 4% figure is recommended since it accounts for the costs of maintaining the fund, as well as inflation, while assuming a historically realistic rate of return. An additional benefit is that fund disbursements using the total valuation methodology are predictable and not erratic at all.
How can we market the endowment to encourage more people to donate to it?
The opportunities are endless. Perhaps the easiest way is to encourage individuals to remember the endowment fund in their estate plan. Other endowment funds have used special events to raise funds and promote awareness of the endowment. You may also wish to consider establishing naming opportunities, such as a memorial fund, usually with a gift of at least $10K. Devices such as gift annuities, donor advised funds, trusts, appreciated stocks and other methodologies are available. Your Catholic Community Foundation is available to help you with these ideas. There is a “Tool Box” that has been created by the Foundation, available in hard copy, CD-ROM and at the Foundation’s web site at www.ccfphx.org. Select ENDOWMENT PARTNERS on the left hand side and then select “toolbox” to find the tools you need to promote your fund. You may also contact the Foundation for more information at 602-354-2400.
What is the role of the Catholic Community Foundation in the Diocese of Phoenix?
The Foundation is an independent, lay-driven 501(c)(3) ministry serving the people of the Catholic Diocese of Phoenix, as well as diocesan parishes, schools, outreach ministries, and other charitable organizations and programs. In addition to providing endowment resources to individuals and organizations, the Foundation makes grants from its unrestricted assets to support Catholic education, Christian formation and communication programs.
Are there any restrictions on how we use the earnings from our endowment fund?
No. You may use the earnings as you would other assets of the parish, school and ministry. Typically, funds are used for tuition assistance and other urgent needs.
How will promoting our endowment affect our capital campaign?
It is an increasing practice to have an endowment component built into capital campaigns. The promotion of the endowment actually strengthens the case for support, as it assures supporters that the capital project being undertaken will enjoy perpetual funding.
To request more information on Endowment Funds with the Catholic Community Foundation, e-mail Donna Marino, President and CEO at dmarino@ccfphx.org or call 602-354-2400.
