Here are some answers to common questions about Organizational Endowment Funds. If you have additional questions, please contact the Foundation.
What are the steps to establishing an endowment fund at the Foundation?
- Complete the appropriate pages of the Organizational Fund Workbook, and mail or fax the pages to the Foundation.
- The Foundation will draft a Fund Agreement and return it for review.
- When the organization is satisfied with the Fund Agreement, the appropriate person signs the Agreement on behalf of the organization and returns it to the Foundation. In return, the Foundation will sign the Agreement and return a copy to the organization for its files.
- The initial gift to the new Fund can be sent in with the signed Fund Agreement, or can come later.
How are the fund's assets invested?
All funds are invested according to the Foundation's investment policies and guidelines, which reflects a desire to obtain the highest investment return possible within acceptable levels of risk. Guidelines for diversification are established to control volatility and to provide a reasonable assurance that no single security or class of securities will have a disproportionate impact on the total portfolio. Download the Foundation's most recent investment report.
The Foundation's Growth Portfolio is expected to produce patterns of returns and fluctuation levels for the overall portfolio that correspond to the return objectives, liquidity objectives and risk tolerance of the Foundation. It is allocated as follows:
| Asset Class | Long-term Percentage Target |
| Large Capitalization U.S. Common Stocks | 26% |
| Medium Capitalization U.S. Common Stocks | 8% |
| Small Capitalization U.S. Common Stocks | 5% |
| Global (non-U.S.) Common Stocks | 22% |
| Emerging Markets | 7% |
| Marketable Alternatives | 10% |
| Domestic Fixed Income | 22% |
The Foundation offers 2 other portfolio options to Organizational Endowments: the Growth/Income Portfolio (50% equities, 50% fixed) to provide long-term support to charities, balanced with a need for short-term grant distributions within a five-year time horizon, and the Income Portfolio (20% equities, 80% fixed) to provide maximum grant distributions within a five-year time horizon.
Investments, whether actively managed or indexed, are measured by appropriate benchmarks and monitored quarterly, and the overall investment portfolio is measured against a composite benchmark that reflects the target asset allocation. The Foundation's investment policies, objectives and guidelines are reviewed at least annually.
How much will the organization receive each year?
The Foundation generally recommends that organizations take a percentage of the fund's value as a distribution once each year - a rate of 5.5% is recommended, as it's consistent with the distribution percentage applied to most of the Foundation's other gift funds established by individual donors. Even though the fund's investment growth is expected to be greater than 5.5% in a given year, the Foundation advises that part of the growth be kept in the fund to provide a buffer against less favorable years and against inflation, and to ensure that a distribution can be made each year. Of course, as the fund grows, this percentage will produce a larger distribution each year. It's important to note that the Foundation does not guarantee an investment return for funds of the Foundation.
Organization can also request a distribution for as much or as little of the fund as they wish, so long as the minimum of $25,000 is always maintained. The distributions from the fund are used as the organization determines, and the purpose of the Fund is designed by the organization. The organization can also advise the Foundation that no distribution is to be made during any given year.
Who advises the Foundation regarding distributions from the fund?
The Endowment Committee designated by the organization notifies the Foundation to request distributions from the fund.
How long does the fund last?
The fund continues to offer support to the organization on a permanent basis. If your organization should lose its tax-exempt status or are no longer viable, you designate the contingent charitable beneficiary.
What does it cost to establish a fund?
There are no fees or costs billed to the organization. An annual administrative fee of 1% of the assets in the fund is assessed against the fund. Fund assets in excess of $1 million are assessed a reduced fee of 0.5%. (The administrative fee is subject to change.)
Who promotes giving to the fund?
The Endowment Committee typically encourages giving among its membership, and the Foundation can support these efforts in several ways. The Foundation will help the Committee design a promotional brochure that's tailored to their fund. There is no charge for the design service - the organization is responsible for printing expenses. The Foundation also has written materials about charitable planning available that can be included in newsletters or other publications. In addition, the Foundation staff is available to work directly with donors and their legal and tax advisers as they design a charitable gift consistent with their wishes.
How can individuals make gifts to the fund?
Cash gifts to the Fund of less than $1,000 should be made directly to the organization. The organization can then, in turn, accumulate the gifts and forward them to the Foundation periodically.
Cash gifts of $1,000 or more and gifts of non-cash assets can be made directly to the Foundation. Checks may be made payable to Lutheran Community Foundation for the benefit of The __(insert name of your organization's fund)__, and sent to the Foundation at 625 Fourth Avenue South, Suite 1500, Minneapolis, MN, 55415. Individuals who wish to make an anonymous gift to the fund can contact the Foundation directly.
How do organizations authorize establishing an endowment fund?
An organizational endowment fund at the Lutheran Community Foundation is typically established by action of the voting members of the congregation or by action of the Board of Directors of the nonprofit organization. The specific form of the action should be consistent with the requirements of the governing documents of the organization. Often, a by-law is drafted which describes the endowment fund, its purposes and its governing structure. Such a by-law might include the following elements:
- Establishment of the endowment fund.
- Transfer of ownership of a certain amount of organizational funds to the Fund.
- Establishment of a Fund Advisory Committee to communicate with the Foundation about the Fund.
- Establishment of a policy for use of distributions from the Fund.
- Authorization for certain officers to execute the Fund documentation.
- Authorization to the Endowment Committee to approve future transfers of funds to the Fund.
- Adoption of bylaws for the governance of the Endowment Committee addressing such items as size of committee, qualifications for serving on committee, voting procedure, frequency of meetings, election of a chairperson and any other desired officers, term of service for members, process for determining use of distributions, promotion of the Fund, process for reporting to the congregation or Board of Directors, etc.).
