Establishing a Nonprofit Endowment

Frequently Asked Questions

Q.  How do we start?

A. Speak with a MaineCF staff person and with some of the eighty-plus nonprofit organizations that have placed their endowments with the foundation.  Look for consensus among your Board members. Invite one of our Philanthropic Services staff members to a Board meeting.  Most of all, ask hard questions!

Q.  What is the minimum for establishing an endowment?

A.  MaineCF manages organizational endowments from a minimum of $25,000 to well over $1 million.

Q.  Traditional financial firms are competing for our endowment, too.  What are the benefits of placing our fund with the Maine Community Foundation?

A.  Here are some of the benefits:

• The Maine Community Foundation is a nonprofit too, and our only business is philanthropy. Ensuring the stability of your organization is essential to our mission. You will benefit from our professional staff, management experience, board oversight and strong community commitment.
  
• Similarly, we will never move away, be purchased or managed by an out-of-state company, or change our essential mission.
  
• MaineCF’s investment strategy of controlling risk through diversification has worked well in the volatile markets of the last ten years. An organization placing its endowment with the foundation directly benefits from being part of a large portfolio. Because of our $200 million asset size, the foundation is able to work with some of the nation’s foremost investment managers. The investment managers are retained and monitored by the foundation’s Investment Committee with the assistance of Cambridge Associates.
  
• Accountability: you will receive regular financial reports on the status of your endowment fund, including the detail of all gifts and grants as well as fees and investment returns.
  
• The nonprofit board is freed up to focus on governing the organization rather than managing endowment funds.
  
• MaineCF staff can be a partner in planned giving and can handle complex or deferred gifts for your organization (i.e., gift annuities or real estate).
  
• Increased visibility:  Placing your endowment with MaineCF connects your organization to a respected statewide public charity. Your fund will also enjoy  increased exposure through listings on the MaineCF website and in the foundation’s annual report.

 

Q.    What control would we have over the endowment?

A.  While the endowment you establish will always benefit your organization, the endowment is considered a reciprocal transfer of assets, which will be managed by MaineCF according to the criteria crafted at the time of the endowment’s establishment.  Those criteria generally include:

• Investment strategies determined by the foundation.
  
• Following the MaineCF “spending rule,” namely an annual payout to your nonprofit of approximately 5 percent of the value of the endowment, with all other fees accruing to the endowment total.

 

Q.  What if we have an emergency and need to take more than the 5%?

A.  Organizations can request to take out more of the endowment through a vote of your governing board, subject to approval by the MaineCF Board of Directors. Recommendations of your governing board shall be solely advisory and not binding on the foundation, but approval of such distributions by the foundation shall not be unreasonably withheld.

 

Q.  What if we don’t have an endowment?

A.  This is an even better reason for partnering with the Maine Community Foundation.  Chances are your organization doesn’t have “planned giving” expertise.  Most nonprofits will discover that they have prospective donors who are particularly interested in making gifts at their deaths, for example.  In the area of financial resource development, MaineCF can provide expertise and technical assistance in planned giving, as well as the opportunity to use its charitable gift annuity fund for donors who are interested in life-income gifts.

 

Q.  What are the fees and what do they cover?

A. The foundation pays a fee to each of its investment managers based on a fee schedule negotiated with the manager.  For the year ended 2006, the average asset weighted investment management fee for all managers and investment related expenses was 0.91%.  In addition, MaineCF charges an administrative fee for overseeing the investment managers and providing services to endowment accounts.  The fee starts at .85% and is graduated with the size of the endowment.

 

To learn more about nonprofit endowments at the Maine Community Foundation or to arrange a meeting, e-mail Jim Geary or call 877-700-6800 (toll-free).

 

MaineCF is a public charity established under the laws of the State of Maine and is recognized as a 501(c)(3) organization under the Internal Revenue Code of the United States of America (federal ID #01-0391479).  Under Financial Accounting Standards Board (FASB) 136, nonprofit endowments are held as an asset of MaineCF, but are also reflected as a liability on its balance sheet.  In addition, the original nonprofit organization continues to report an asset on its own balance sheet.