A community foundation is a nonprofit grantmaker that serves a specific geographic area that typically administers permanently endowed funds. A community foundation is allowed by law to commingle endowed funds for investment and administration. Community foundations are required by law to fulfill donor intent in perpetuity.
An endowment is a gift that is not meant to be spent immediately. A term endowment may be spent after a certain period of time or after certain conditions have been met. A permanent endowment is never spent, but some or all of its earnings may be spent.
The Community Foundation of Northern Illinois (CFNIL) was founded in 1953. Headquartered in Rockford, Illinois, CFNIL serves Boone, Ogle, Stephenson, and Winnebago Counties. It is a steward for 370 endowed funds totaling over $86 million in value. Each year, endowments at CFNIL generate over $3 million in grants, scholarships, and distributions to nonprofit organizations for the benefit of the people of Northern Illinois.
There is no cost to a donor to establish an endowment at CFNIL. CFNIL staff meet with donors to learn about their charitable intentions and talk about whether an endowment at CFNIL fits their needs. If the answer is yes, a formal agreement is executed between the donor and CFNIL, spelling out the donor’s charitable intent and the rules governing the administration of the endowment. The endowment is created when the donor makes their first contribution to it.
The motivations of individual donors vary. Donors may create designated endowments for the benefit of particular nonprofits or for a charitable purpose. They may create a scholarship endowment for students attending a particular school, studying a particular subject, or demonstrating certain character, ability, or need. Donors may create a donor advised endowment to take advantage of an immediate tax benefit or to retain the ability to advise grants from their endowment in the future.
Donors appreciate the concept of supporting a charity or a cause in perpetuity and leaving a legacy for future generations. Donors are often surprised to learn how easy it is to create an endowment at a community foundation and that there is a nonprofit institution dedicated to honoring their charitable intent.