Nonprofit Funds

As a fellow nonprofit, the East Texas Communities Foundation is keenly aware of the funding challenges facing our charitable organizations. ETCF can assist nonprofits in two significant ways. First, in its role as grantmaker, the Communities Foundation has distributed millions of dollars to nonprofits. Second, the Communities Foundation assists the nonprofit sector through careful stewardship of endowments for charitable agencies. If you are a staff member, board member, volunteer, or advisor of a nonprofit organization, you may find that placing an endowment with the East Texas Communities Foundation is a more cost-effective and practical way to manage and build your endowment than managing it yourself.

What is an “endowment”?

ETCF defines endowment as a long-term fund, the principal of which is invested, and the earnings from which can be distributed and used by the charitable organization annually. It should not be confused with a capital fund, a reserve fund, or a special project fund, all of which generally allow expenditure of principal.

Why would a nonprofit organization want to create an endowment fund?

  • An endowment fund is a long-term, steady, and secure source of income.
  • Endowments are an attractive option to donors, particularly those who wish to make large gifts or leave a gift by bequest since their donation is invested in perpetuity and only annual income is expended for short-term operating costs.
  • An endowment fund tells the community that your organization is building for the future and intends to serve the community for many years to come.
  • Even a small endowment is a seed to which your organization and its supporters can add.

Agency endowment services of the East Texas Communities Foundation

1. Investment Management
  • Effective professional management: East Texas Communities Foundation’s endowments are managed by professional investment managers chosen by its Investment Committee for their expertise. The Investment Committee represents a significant pool of experience and expertise in investment management. Because the funds are pooled for investment purposes, agency endowments in the Communities Foundation obtain lower fees, greater protection against market fluctuation, greater diversity of investments, and more efficient investment than endowments that are invested separately.
  • Monitoring investment managers: The Investment Committee and independent consultants review the performance of the managers quarterly. The Foundation’s oversight frees your agency’s board and staff to concentrate on the agency’s mission and program.
2. Administration
  • Accounting: The East Texas Communities Foundation handles all accounting on the endowment including interest and dividend income, contributions, distributions, and realized and unrealized capital gains. Your agency receives a quarterly statement on the fund.
  • Tax filing, auditing, and insurance: The endowment is fully covered by the Communities Foundation’s non-profit status and IRS tax exemption, eliminating the need for any start-up legal work or annual tax filing. In addition, the endowment is audited as part of the East Texas Communities Foundation’s annual independent audit.
3. Building the Endowment
  • Publicity: The fund is listed in ETCF’s annual report and other publications, building a greater awareness of the endowment and a positive image for it. The annual report goes to thousands of individuals and corporations, most of whom are already philanthropists.
  • Handling sophisticated gifts: The East Texas Communities Foundation is able to handle gifts of publicly traded and closely held securities, real estate, life insurance, and other types of gifts, and can provide the expertise needed to receive these types of gifts into your agency endowment.
4. Fees

ETCF charges administrative fees for the purpose of covering the administrative costs of the Foundation and building our own permanent endowment to keep cost low. Nonprofit Endowment Funds are charged annually based on their fund balance: 1% of the first $500,000, .75% of the next $500,000, .50% of the next $2,000,000 and .25% of any remaining balance. In addition, each fund is charged for out-of-pocket expenses such as investment management fees, sales commissions, or other handling fees incurred directly by the fund.

The East Texas Communities Foundation manages numerous nonprofit funds of various sizes. We would welcome the opportunity to work with your agency in the careful stewardship of its endowment.

For more information about how ETCF can partner with your organization and donors, contact Kyle Penney, ETCF President, at 903.533.0208.