Q. Financial and investment firms also offer investment management services. What are the benefits of placing our assets with the Maine Community Foundation?
A. The community foundation is a nonprofit organization, too, and our only business is philanthropy. Ensuring the stability of your organization is essential to our mission. The advantages of working with the Maine Community Foundation include:
- Participation in a diversified investment portfolio with total assets under management in excess of $400 million
- Investment oversight from a dedicated investment committee comprised of financial and business professionals each of whom has extensive experience in the investment and financial services industries
- Investment advisory and monitoring services from Cambridge Associates, a preeminent national investment consulting group specializing in agency nonprofit funds management.
Q. Are there any additional services we would receive if our assets were managed by the Maine Community Foundation?
A. Yes. In addition to investment management, agency nonprofit fund holders benefit from the following services:
- Clear and concise reporting of all financial activity
- Online access to fund statements and fund summary reports
- Sub-accounting for multiple gifts or restrictions on charitable use
- Periodic meetings by foundation staff with board of directors and/or committees
- Processing gifts of securities and tangible property
- Planned giving expertise in the area of charitable gift annuities
Q. What is the minimum for establishing an agency nonprofit fund?
A. The minimum for this type of fund is $25,000. If an organization would like to establish multiple sub-funds, the minimum is considered in aggregate of all agency nonprofit funds.
Q. What are the fees and what do they cover?
A. The Maine Community Foundation charges an administrative fee for overseeing the investment managers and providing services to fund holders. The administrative fee for an agency nonprofit fund starts at 0.85% per year and is graduated downward according to the size of the fund. The community foundation pays a fee to each of its investment managers based on a schedule negotiated with the manager. The average asset-weighted investment management fee for all managers and investment related expenses is variable, but averages around 0.85%.
Q. What assets can be used to establish an agency nonprofit fund?
A. The Maine Community Foundation’s primary investment portfolio is designed to preserve and enhance the real value of assets over time while providing a sufficient rate of return to fund holders. With this in mind, permanent and other long-term assets such as traditional endowments, rainy-day funds, reserve funds, and any other assets intended to be used over a long-term horizon are best suited for establishing an agency endowment fund.
Q. How much will be distributed from the fund each year?
A. The Maine Community Foundation’s Board of Directors sets a general spending policy with the goal of achieving a real rate of return (after inflation and fees) over a rolling five- to ten-year period. For new funds, the spending policy is 4% of the average asset value over the preceding twelve quarters. This rate may be tailored to the needs of specific fund holders. The amount for distribution is available each year. Organizations may choose to receive this amount on a set schedule or at their request. Any amount not requested will roll forward and be available the following year. To comply and conform to the Uniform Prudent Management of Institutional Funds Act (UPMIFA), there may be times when a rate lower than the current policy is recommended.
Q. What if our organization needs more than the annual spending amount?
A. Based on the terms of the fund agreement, your organization can request a distribution in excess of the annual amount through a vote of your governing board. This process would apply to either a partial or full distribution from the fund. Requests from your governing board will be solely advisory and not binding on the Maine Community Foundation. However, approval of such distributions by the community foundation will not be unreasonably withheld.
Q. Who owns the fund and how are the funds accounted for?
A. Agency nonprofit funds are legally owned by the Maine Community Foundation and are accounted for in accordance with the Statement of Financial Accounting Standards No. 136. To comply with FASB Statement 136, the community foundation records an offsetting liability for the fair market value of the agency nonprofit funds. Your organization reports the fair market value of the fund as a beneficial interest in an asset held by the community foundation.
Q. Does our organization need to have an investment policy? What if our board of directors has already adopted one?
A. No. Organizations with funds managed by the Maine Community Foundation do not need an investment policy. As a component fund of the community foundation, your fund is subject to our Statement of Investment Objectives and Policies. It is not generally a problem if your organization has adopted an investment policy of its own, as long as the policy does not contradict or compromise the community foundation’s policy.
To learn more about agency nonprofit funds at the Maine Community Foundation or to arrange a meeting, please contact Liana Kingsbury by e-mail or by phone, toll-free, at (877) 700-6800, ext. 2201.