SECTION 6

A CORNUCOPIA OF FUND MANAGEMENT LEGAL

ISSUES

LEGAL ASPECTS OF FUND MANAGEMENT

CORNUCOPIA

• Donor advice vs. donor control • What requires board approval?• Transfer of fund to another foundation• Corporate funds• Fund policies and practices for the long game • DAF successor advisors• Maintain fund or close and transfer• Power of attorney and fund advising

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DONOR ADVICE VS. DONOR CONTROL

• Donor control means donor can direct grants, investments, spending, etc.

• Donor control would be stipulated in the agreement with words like “control”, “right” and “direct” associated with the donor’s “powers”

• Donor control violates variance power and is prohibited - will disqualify tax benefits for gift

• Donor advice means that the community foundation board has absolute and final control

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WHAT REQUIRES BOARD APPROVAL?

• Ultimately, the board has final control over all aspects of the community foundation

• Nonprofit corporation law and UPMIFA permits boards to prudently delegate decisions to committees, staff, counsel (legal, investment, accounting, etc.)

• Key items require board approval

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BOARD APPROVAL

• Minutes of meetings• Financial reports• Audit• 990 (only review required)• CEO hire/fire and review• Policies (investment, spending, fees, gift acceptance,

ethics, personnel)• Agreements or Templates (gifts, services, goods)• Strategic Plan• Other

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TRANSFER FUNDS TO ANOTHER FOUNDATION

• Transfer allowed to another tax exempt organization qualified as 501(c)(3)

• Always abide by terms of gift agreements• Honor donor restrictions and intent• Document due diligence prior to transfer• Transfer agreement with recipient• Report on 990

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CORPORATE FUNDS

• Types of corporate funds: Scholarships, Advised, Other

• Scholarships require special federal rules if for employees or family of employees

• Scholarships must follow PPA requirements if corporation is represented on committee

• Corporate advised funds must follow same due diligence as DAFs created by persons

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POLICES FOR THE LONG RUN

• Restrict DAF successor advisors – perhaps one subsequent generation only if fund is large enough to justify (e.g., $100,000+)

• Merge or modify small and old funds• Conduct due diligence (copy of confirming

legal documentation) if a Power of Attorney or Guardian requests to advise if donor is incompetent but still living

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