CHARITABLE PLANNING FOR CLIENTS WHO AREN’T ...Panelist, Business Succession and Drafting Options for the Business Owner, State Bar of Texas, Advanced Drafting: Estate Planning and

CHARITABLE PLANNING FOR CLIENTS WHO AREN’T

WEALTHY: IDEAS AND FORMS YOU CAN TAKE BACK TO YOUR

OFFICE AND USE TOMORROW

Authors:

SHANNON G. GUTHRIE

Benenati Law Firm

2816 Bedford Rd.

Bedford, Texas 76021

(817) 267-4529

[email protected]

C. STEPHEN SAUNDERS

Saunders, Norval, Nichols &

Atkins, L.L.P.

2630 Exposition Blvd., Ste. 203

Austin, Texas 78703

(512) 472-7111

[email protected]

Presented by:

BROOKE HARDIE

Saunders, Norval, Nichols & Atkins, L.L.P.

2630 Exposition Blvd., Ste. 203

Austin, Texas 78703

(512) 472-7111 (Ext. 7)

[email protected]

State Bar of Texas

INTERMEDIATE ESTATE PLANNING

AND PROBATE COURSE

June 26, 2012

San Antonio

CHAPTER 6

mailto:[email protected]

Bar Admissions: State Bar of Texas

SHANNON G. GUTHRIE Benenati Law Firm 2816 Bedford Road

Bedford Texas 76021 (817) 267-4529

Fax: (817) 684-9000 [email protected]

(Offices also in Addison and Boyd)

Education: J. D., Indiana University School of Law (1993); B.S., University of Evansville (1990) (magna cum laude)

Professional Achievements, Activities and Community Involvement: Board Certified, Estate Planning & Probate Law, Texas Board of Legal Specialization; Member, Exam Committee 2005-2011 State Bar of Texas- Member, Real Estate, Probate and Trust Law Section; Member, Real Estate, Probate and Trust Law Council- 2007-2011; Chair, Trust Code Committee- 2008-present; Member, Tax Section; Co-Vice Chair, Tax Exempt Organizations Committee, Tax Section, State Bar of Texas, 2011-present Fellow, American College of Trust and Estate Counsel - Member, Charitable Committee 2007-2011; Member, Editorial Board 2005-2008 Dallas County Bar Association- Member, Probate Section Dallas Estate Planning Council- Board of Trustees 2007-2009 Gift Planning Advisory Council, University of Texas- Austin Professional Advisor Outreach Cabinet, Community Foundation of North Texas Texas Health- Harris Methodist, Harris Health Alliance, Member Carroll Education Foundation- Board Member

Spealdng Engagements: Author and Speaker, Matters of Life and Death: Working With Clients at Various Life Stages on Their Charitable, Financial and Estate Planning, Austin Advisors Forum, 2012 Moderator and Speaker, Let Me Speak With the Manager! - Planning With Business Assets, State Bar of Texas, Advanced Estate Planning Strategies, 2012 Speaker and Co-Author, Charitable Planning With Community Foundations, Community Foundation of North Texas, Professional Advisors Cabinet Annual Briefing and Charitable Update, 2012 Speaker, Top Ten Things to Take Away, State Bar of Texas, Advanced Drafting: Estate Planning and Probate Course, 2011 Course Director, State Bar of Texas, Advanced Estate Planning and Probate Course, 2011 Panelist, Strategic Charitable Planning Techniques, State Bar of Texas, Advanced Estate Planning Strategies, 2011 Moderator, Private Foundations: Succession and Legacy Issues, UT Nonprofit Organizations Institute, 2011 Structuring the Private Foundation, State Bar ofTexas, Estate Planning and Probate Drafting Course, 2010 Directors Handbook and Orientation, State Bar of Texas, Governance of Nonprofit Organizations, 2010 Panelist, Business Succession and Drafting Options for the Business Owner, State Bar of Texas, Advanced Drafting: Estate Planning and Probate Course, 2008 Charitable Trusts, the Good, the Bad and the Not So Ugly, State Bar of Texas, Non-Profit Governance Course, 2008 Creating Your Organization, LiveStrong Summit, Lance Armstrong Foundation, 2008 Overview of the Pension Protection Act, The University of Texas- 25111 Annual Non-Profit Organizations Institute, 2008 Creative Coordination of Probate and Non-Probate Assets, State Bar of Texas, Advanced Drafting: Estate Planning and Probate Course, 2007 Charitable Giving Post PPA, State Bar ofTexas, Advanced Tax Law Course, 2007 Panelist, Charitable Planning for Clients Who Aren't Wealthy: Ideas and Forms You Can Take Back to Your Office & Use on Monday, State Bar of Texas, Advanced Estate Planning & Probate Course, 2007

Course Director, State Bar of Texas, Advanced Drafting: Estate Planning and Probate Course, 2007 Judicial Construction and Modification of Trusts: Practical Advice for the Client, Dallas Estate Planning Council, 2007 Foundation -Do's & Don'ts, Advanced Estate Planning, Center for American & International Law 2006 Charitable Planning, Texas Bankers Association, Trust and Wealth Management Seminar 2006 Moderator, Estate Tax Law Changes and Other Hot Topics That May Affect Estate Planners, State Bar of Texas, Advanced Drafting and Probate Course 2005 Private Foundations, Tarrant County Bar Association, Tax Section, 2005 Panelist, A New Paradigm For Trusts: Rethinking Trust Structure in Light of Changing Purposes, a Changing Legislative Landscape and a Litigious Society, State Bar of Texas, Advanced Estate Planning Strategies, 2005 Creation of Family Foundations, Creation and Structure, Wills Trusts and Estate Law Planning Institute, Center for American and International Law, 2004 Panelist and Author, Working With and Giving Through Community Foundations, State Bar of Texas, Charitable Giving Course, 2004 A Tale of Two Tools: Split Interest Trust Drafting in a Low Interest Environment (CLTS and GRTS) - Charitable Lead Annuity Trusts and Charitable Lead Unitrusts With Forms, State Bar of Texas, Advanced Drafting Course, 2003

Personal: Mother of three (3) children: Devin (daughter, age 15), Nathan (soh, age 11) and Chloe (daughter, age 9); love football (especially high school and college), baseball (Texas Rangers and my son's little league team) and Dallas Mavericks basketball.

PERSONAL:

C. Stephen Saunders Saunders, Norval, Nichols & Atkins, L.L.P.

2630 Exposition Blvd., Ste. 203 Austin, Texas 78703

(512) 472-7111 Email: [email protected]

*************************

Children: Kate (31), New York, New York, University of Colorado '03, and Ian (28), Austin Community College, Austin, Texas, both graduates of Casis Elementary School, 0. Henry Middle School and Austin High School

Hobbies: Running, watching high school athletics, planting and trimming trees, and travel

EDUCATION:

Memorial High School, Houston (1971); B.A. in History with Honors, The University of Texas at Austin (1975) (Phi Beta Kappa); J.D., The University of Texas School of Law (1980)

PROFESSIONAL ACTIVITIES:

• Partner, Saunders, Norval, Nichols & Atkins, L.L.P. (formerly Saunders & Norval), Novemberl992-present;

• Shareholder, Jenkens & Gilchrist, Austin, Texas- February 1991-0ctober 1992 • Shapiro, Edens & Cook- October 1984-February 1991 (merger with Jenkens & Gilchrist), partner 1988; • Clark, Thomas, Winters & Shapiro (September 1980-September 1984), associate • Board Certified, Estate Planning and Probate Law; Fellow, American College of Trust and Estate Counsel • REPTL Section of State Bar, Legislative Committee; REPTL Council Member 2005-2009

LEGAL EDUCATION RELATED ACTIVITIES:

Author/speaker and Course Director for State Bar's Advanced Estate Planning and Probate Course; Course Director and speaker for the Advanced Drafting: Estate Planning and Probate Course; Course Director and speaker for the Advanced Estate Planning Strategies Course; Author/speaker for the Will Drafting Institute; Course Director/speaker for the Intermediate Strategies Course; Speaker for the Practice Skills Course; Speaker for the Charitable Giving Course; Speaker for the Advanced Drafting: Real Estate Course; Speaker at the NASCO/NAAG Conference (2004); Speaker for the Big XII Development Conference (2005); Speaker at the Lance Annstrong Foundation LiveStrong Summit, Columbus, Ohio (2008); Speaker at UT Professional Advisors Day; Speaker at Greeley & Weld County Community Foundation Annual Meeting 2011; Coeditor/contributing author, How to Live-and Die-With Texas Probate; Member, Estate Planning and Probate Law Paralegal Commission, State Bar of Texas.

Page2

PRACTICE: Practice consists of estate planning and probate work, with a focus on charitable giving, including the creation and representation of family foundations and extensive work in creating funds with the Austin Community Foundation for the Capital Area. Extensive experience in representing individuals in their capacities as executors and trustees and in representing beneficiaries of estates and trusts. Worked successfully in the 2001-2011 Sessions of the Texas Legislature to preserve the Rule Against Perpetuities and in 2009 to pass the Orphan Trusts bill; Donoghue Award, Austin Community Foundation, 2010.

SERVICE ON CHARITABLE BOARDS: (*Current board positions)

Heritage Society of Austin W estcave Preserve

*West Austin Youth Association Endowment Westminster Presbyterian Day School Austin Community Foundation for the Capital Area:

(President, 2006) *The Henry Renfert , Jr. Fund Advisory Committee *Stephen F. Austin Society Austin High 125111 Anniversary Celebration, co-chair *Charitable Holdings Board *The Charles & Betti Saunders Foundation Fund

*Republic of Texas History Complex Vision Team, Daughters of the Republic of Texas

*Texas Book Festival Advisory Council Austin High School PTSA

(President, 2001/2002) West Austin Youth Association

*University of Texas at Austin Gift Planning Advisory Council

*University of Texas at Austin Development Board

*The Fistula Foundation, San Jose, California

*University of Northern Colorado Libraries Development Advisory Board

*The Trail Foundation

Areas of Practice

BROOKE HARDIE SAUNDERS, NORVAL, NICHOLS & ATKINS, L.L.P.

2630 Exposition Blvd., Ste. 203 Austin, Texas 78701

512.472.7111 (ext. 7) phone l512.472.7790fax [email protected]

Practice consists of estate planning and probate work, including representing individuals in their capacities as executors, trustees and beneficiaries.

Career History • Saunders, Norval, Nichols & Atkins, L.L.P., Austin, Texas, September, 2010- present • Law Offices of Brooke Hardie, Austin, Texas, 2006 - 2010 • Segal, McCambridge, Singer & Mahoney, Austin, Texas, 2004-2006 • Hermes, Sargent, Bates, L.L.P., Dallas, Texas, 1999-2002

Civic and Professional Affiliations • Atticus Circle- Board Member (201 0 to 2012) • Green lights for Non-Profit Success- Community Leadership Council (201 0 to present) • Greenlights for Non-Profit Success- Board of Directors (2004 to 2008) • Austin Women Entrepreneurs, Inc. ("AWE") - Founding Member and Board of Directors (2008 to

2010) • Elizabeth Ann Seton Board - Board of Directors (2009 to 201 0) • State Bar of Texas and Austin Bar Association • Licensed to practice in the US District Courts for the Eastern, Western, Northern and Southern

Districts

Speeches & Publications • "Charitable Planning for Clients Who Aren't Wealthy," Advance Estate Planning & Probate Course,

San Antonio, Texas, June 2012 (speech) • "Estate Planning & Probate 1 01," Advance Estate Planning & Probate Course, Fort Worth, Texas,

June 2011 (speech) • "Smart Planning for Smart Women: Protecting Yourself, Your Family, Your Assets," Continuing &

Innovative Education, The University of Texas at Austin, Austin, Texas, September, 2010 (speech) • "Ancillary Documents: Beyond the Statutory Forms," 201h Annual Estate Planning and Probate

Drafting Course, Dallas, Texas October, 2009 (speech and publication) • "What Was I Thinking? Estate, Probate and Practice Management: Tips and the Top 10 Things to

Avoid," 32nd Annual Advanced Estate Planning & Probate Course, Dallas, Texas, June 2008 (speech and publication)

• "Life in a One or Two-Lawyer Firm: Small Town and Big City Perspectives"-The University of Texas School of Law and the Texas State Bar Association Present: How to Establish, Organize and Operate a Successful Solo, Small Firm, or Government Practice, Austin, Texas, February 2008 (speech)

• "What Every Person Should Know About Estate Planning," Onion Creek Country Club, Austin, Texas, February 2008 (speech)

Education • University of Houston School of Law, J.D., 1999 • The University of Texas at Austin, B.A .. with honors, 1995 • University of Seville, Spain, 1994

Charitable Planning For Clients Who Aren’t Wealthy: Ideas

and Forms You Can Take Back to Your Office and Use Tomorrow Chapter 6

i

TABLE OF CONTENTS

I. INTRODUCTION………………………………………………………………………………………….. .... 1

II. TAXATION ....................................................................................................................................................... 1

a. Community Foundations are Taxed as Public Charities……………………………............ ........................ 1

b. Federal Income Tax Deduction…………………………………………………………….. ........................ 2

c. Federal Estate Tax Deduction……………………………………………………………… ......................... 3

d. Federal Gift Tax Deduction………………………………………………………………... ......................... 3

III. REQUIREMENTS FOR A COMMUNITY FOUNDATION TO BE TREATED AS A SINGLE ENTITY ... 3

a. Name……………………………………………………………………………………….. ......................... 3

b. Common Instrument……………………………………………………………………….. ......................... 3

c. Common Governing Body………………………………………………………………….......................... 3

d. Common Reports…………………………………………………………………………... ......................... 4

IV. COMPONENT FUNDS ..................................................................................................................................... 4

a. Creation………………………………………………………………………….................. ........................ 4

b. Material Restrictions……………………………………………………………………….. ........................ 4

V. DONOR ADVISED FUNDS ............................................................................................................................. 7

a. Background………………………………………………………………………………… ......................... 7

b. Taxable Distributions: I.R.C. § 4966………………………………………………………. ........................ 9

c. Taxes on Prohibited Benefits: I.R.C. § 4967………………………………………………. ....................... 11

d. Taxes on Excess Benefit Transactions: I.R.C. § 4958……………………………………... ...................... 12

e. Taxes on Excess Business Holdings: I.R.C. § 4943………………………………………. ....................... 14

VI. PRACTICAL CONSIDERATIONS: HOW WE USE COMMUNITY FOUNDATIONS ............................. 16

a. Advantages of donor-advised funds over private foundations…………………………….. ....................... 16

b. Endowments………………………………………………………………………………... ...................... 16

c. Ways in Which Private Foundations can Benefit from Community Foundations…………. ...................... 16

d. Overseas Grant-Making by Private Foundations Through a Donor-Advised Fund……….. ....................... 17

e. Scholarship Funds…………………………………………………………………………......................... 18

f. Donor Intent………………………………………………………………………………... ....................... 18

g. Field of Interest Funds……………………………………………………………………... ....................... 19

VII. PRACTICAL CONSIDERATIONS: OTHER ISSUES

a. Fees………………………………………………………………………………………… ....................... 20

b. Geography………………………………………………………………………………….. ...................... 19

c. Perpetuity and Advisory Committees……………………………………………………… ....................... 19

d. Flexibility…………………………………………………………………………………... ...................... 20

e. Publicity……………………………………………………………………………………. ...................... 20

f. Other Considerations………………………………………………………………………......................... 20

VIII. CONCLUSION ................................................................................................................................................ 21

EXHIBITS

A. Donor-Advised Fund Document and Bylaws

B. Map of Texas Community Foundations

C. List of Texas Community Foundations and Contact Information

D. Private Foundations vs. Donor-Advised Funds

E. Endowment Forms

F. Overseas Grant-Making Form

G. Expenditure Responsibility and Equivalency Determination Forms

H. Scholarship Fund Forms



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I. The Princeton v. Robertson Case: Too Important to be Left to the Lawyers

J. Special Project Fund: AWARE

K. Special Project Fund: Austin High School 125th Anniversary

L. Special Project Fund: Austin High School Alumni Association

M. Special Project Fund: Stephen F. Austin Society

N. Community Foundation Resources

O. Sample Bequest Wording



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CHARITABLE PLANNING FOR CLIENTS WHO AREN’T WEALTHY: IDEAS

AND FORMS YOU CAN TAKE BACK TO YOUR OFFICE AND USE ON

MONDAY

I. Introduction. In 2010 total charitable giving in the United States was almost $291 Billion (2% of the

GDP). While the media always focuses on the megagifts, donations from individuals comprise 73% of the

total combination of all bequests, family foundation, and individual giving. About half of all individual

giving is done by households with incomes under $100,000. Almost 10% of the American workforce is

employed in the non-profit sector.

We know from our practices that our clients who are not wealthy by almost any standard make

contributions to their churches, universities, kids‟ PTA‟s and sports associations, and all sorts of arts and

human services organizations. With some discussion, bequests to those same organizations often are made

in our clients‟ wills. Charitable planning is clearly not only for our wealthy clients. And, among our clients

who are not wealthy it is not only done by the people we read the occasional newspaper story about who

never made much money but lived very modestly and left their entire estates to charity.

Community foundations are often referred to as being among the best kept secrets. Since the first

community foundation was created in Cleveland in 1914, the amount of philanthropy they have generated

and facilitated is enormous. There are over 700 community foundations in the United States, nine of which

have assets of $1.0 billion or more. In 2008, seven community foundations granted over $100 million.

There are nearly 700 community foundations outside the United States. Texas has at least 40 community

foundations which are located all over the State.

Wikipedia defines community foundations as “instruments of civil society designed to pool

donations into a coordinated investment and grant making facility dedicated primarily to social

improvement of a given place.” They have been described as “democratizing” philanthropy by making

charitable giving easy and inexpensive for the average person.

It is that ease of using community foundations, and having them as inexpensive solutions to almost

every conceivable charitable planning issue that any client, wealthy or not, might have that we are

presenting here. This presentation does not focus on creating or representing community foundations. The

focus is on how professional advisors can most easily use community foundations. The forms attached as

exhibits are offered to illustrate the solutions community foundations offer us all. Every planning situation

is different, of course, and different community foundations approach issues differently. However, these

forms have been successfully used by the authors and they are presented as examples only.

II. Taxation. If properly structured, community foundations are taxed as public charities and donors receive a

federal income tax deduction, federal estate tax deduction, and federal gift tax deduction.

a. Community Foundations are Taxed as Public Charities.

i. If a community foundation satisfies the “public support test” by attracting contributions

from a diverse group of donors, it will be classified as a public charity under I.R.C. §

501(c)(3) and thereby has significant advantages over a private foundation. §

170(b)(1)(A)(vi).



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b. Federal Income Tax Deduction.

i. Individual Donors Receive a Charitable Income Tax Deduction for Contributions to a

Community Foundation.

1. § 170(b)(1)(A)(vi) states that individuals receive an income tax deduction for any

charitable contribution to an organization referred to in § 170(c)(2) which normally

receives a substantial part of its support from a governmental unit or from direct or

indirect contributions from the general public. § 170(c)(2) refers to community

foundations.

2. Cash and non-appreciated property: The deduction shall be allowed to the extent

that the aggregate of the contributions does not exceed 50% of the taxpayer‟s

contribution base for the taxable year. § 170(b)(1)(A).

3. Appreciated Property: The maximum deduction allowable for contributions of

capital gain property is an amount equal to the lesser of

a. 30% of the taxpayer‟s contribution base; or

b. the amount of the taxpayer‟s 50% limitation remaining after the taxpayer‟s

contributions to public charities are considered. § 170(b)(1)(c).

For example, if a taxpayer contributes an amount equal to 40% of his or her

contribution base to public charities, he or she is limited to a deduction equal to

10% of his or her contribution base for contributions to which the 30% limitation

applies. However, the 30% limitation for contributions of capital gain property

applies only if the donor wishes to deduct the fair market value of the property. The

donor may elect to deduct only his or her basis in the property, in which case the

50% limitation will apply. § 170(b)(1)(c)(3).

ii. The deduction by a corporation in any taxable year for charitable contributions, as defined

in § 170(c), is limited to 5% of its taxable income for the year computed without regard to:

1. The deduction for charitable contributions,

2. The special deductions for corporations allowed under part VII, subchapter B,

chapter 1 of the Code,

3. Any net operating loss carryback to the taxable year under Section 172,

4. The special deduction for Western Hemisphere Trade Corporations under § 922,

and

5. Any capital loss carryback to the taxable year under § 1212(a)(1).

A contribution by a corporation to a trust, chest, fund, or foundation organized and operated

exclusively for religious, charitable, scientific, literary, or educational purposes or for the

prevention of cruelty to children or animals is deductible only if the contribution is to be

used in the United States or its possessions for those purposes. § 170(c)(2).



3

iii. If the community foundation does not qualify as a public charity (but is treated for federal

income tax purposes as a private foundation) the donor‟s federal income tax deduction is

limited to the deductions allowed to a private foundation.

c. Federal Estate Tax Deduction.

i. The value of property transferred at decedent‟s death to a community foundation is 100%

deductible in determining the amount of federal estate tax. I.R.C. § 2055(c).

d. Gift Tax Deduction.

i. The Donor receives a 100% gift tax charitable deduction for the value of the assets donated

during life to a community foundation. I.R.C. 2522(a).

III. Requirements for a community foundation to be treated as a single entity, rather than as an

aggregation of separate funds: Treas. Reg. 1.170A-9(f)(11). In order for donors to receive an income tax

deduction, the community foundation must qualify as a single entity by adhering the requirements below.

a. Name: The organization must be commonly known as a community trust, fund or foundation in the

community or area it serves. The name may also convey the concept of a capital or endowment

fund to support charitable activities in the community or area it serves. Treas. Reg. § 1.170A-

9(f)(11)(iii).

i. “Austin Community Foundation”

ii. “Foundation for Southeast Texas”: Beaumont

iii. “Highland Lakes Legacy Fund”: Marble Falls

iv. “Levelland Area Endowment”: Strictly for Hockley County

b. Common Instrument: The community foundation must be subject to a common governing

instrument or a master trust or agency agreement (“governing instrument”). Treas. Reg. § 1.170A-

9(f)(11)(iv).

i. May be embodied in a single document or several documents containing common

language.

ii. The language may be included an instrument of transfer to the community foundation

making the fund subject to the community foundation‟s governing instrument.

iii. A community foundation may adopt a new governing instrument with new provisions to

apply to future transfers without violating this section.

c. Common Governing Body: The community foundation must have a common governing body or

distribution committee (“governing body”) which either directs or monitors the distribution of all of

the funds exclusively for charitable purposes (within the meaning of § 170(c)(1) or (2)(b)). Treas.

Reg. § 1.170A-9(f)(11)(v).

i. For Example, “Board of Governors” at the Austin Community Foundation and the “Board

of Directors”at the Greater Houston Community Foundation.



4

ii. The governing body must, to the extent possible under state law, have the power to modify

any restriction on the distribution of the funds it deems to be unnecessary, incapable of

fulfillment, or inconsistent with the charitable needs of the community, and to replace any

trustee, custodian, or agent for breach of its fiduciary duty or for failure to obtain a

reasonable rate of return. Treas. Reg. § 1.170A-9(f)(11)(v)(B). See Rev. Rul. 77-333 for

examples of provisions that meet this requirement.

iii. The governing body must commit itself, by resolution or otherwise, to exercise its powers

in the best interests of the community trust, and must ultimately do so. Treas. Reg. §

1.170A-9(f)(11)(v)(E). See Rev. Rul. 77-334 for examples of provisions that meet this

requirement.

iv. The governing body must also commit itself, by resolution or otherwise, to obtain

information and take steps to ensure that a reasonable rate of return is realized on the assets

of each of its component funds with due regard to conserving the principal of the funds and

in furtherance of the exempt purposes of the trust. Treas. Reg. § 1.170A-9(f)(11)(v)(F).

See Rev. Rul. 77-334 for examples of provisions that meet this requirement.

d. Common Reports: The community foundation must prepare periodic financial reports treating all of

the funds which are held by the community trust, either directly or indirectly or in component parts,

as funds of the organization. Treas. Reg. 1.170A-9(f)(11)(vi).

IV. Component Funds. Many donors will create funds at community foundations, as opposed to simply

donating to the community foundation itself. It is important that the fund meet the following two

requirements so that donors will receive the applicable deductions. For a fund associated with a community

foundation to be treated as a component part of that community foundation (rather than as a separate trust or

not-for-profit corporation or association), the two following rules must be met:1

a. Creation: The fund must be created by a gift, bequest, legacy, or other transfer to a community

foundation which is treated as a single entity under Section § 170A-9(f)(11)(ii)(a).

b. Material Restrictions: The fund may not be subject to any material restrictions or conditions with

respect to the transferred assets. § 170A-9(f)(11)(ii)(B).

i. Definition: A material restriction is a condition that prevents a community foundation

“from freely and effectively employing the transferred assets, or the income derived

therefrom, in furtherance of its exempt purposes.” Treas. Reg. 1.507-2(a)(8). Whether or

not a particular condition or restriction imposed upon a transfer of assets is material (within

the meaning of paragraph (a)(8) of this section) must be determined from all of the facts

and circumstances of the transfer. Id.

ii. Significant facts and circumstances include:

1. Whether the public charity (including a participating trustee, custodian, or agent in

the case of a community trust) is the owner in fee of the assets it receives from the

private foundation;

1 Treas. Reg. 1.170A-9(f)(ii).



5

2. Whether such assets are to be held and administered by the public charity in a

manner consistent with one or more of its exempt purposes;

3. Whether the governing body of the public charity has the ultimate authority and

control over such assets, and the income derived therefrom; and

4. Whether, and to what extent, the governing body of the public charity is organized

and operated so as to be independent from the transferor.

iii. Factors not adversely affecting determination. Treas. Reg. 1.507-2(a)(8)(iii).

1. Name. The fund is given a name or other designation which is the same as or

similar to that of the transferor private foundation or otherwise memorializes the

creator of the foundation or his family.

2. Purpose. The income and assets of the fund are to be used for a designated purpose

or for one or more particular section 509(a) (1), (2), or (3) organizations, and this

use is consistent with the charitable, educational, or other basis for the exempt

status of the public charity under section 501(c)(3).

3. Administration. The transferred assets are administered in an identifiable or

separate fund and the community foundation is the legal and equitable owner of the

fund and the governing body exercises ultimate and direct authority and control

over the fund. e.g. a fund to endow a chair at a university or a medical research

fund at a hospital.

4. Restrictions on disposition.

a. The transferor private foundation transfers property and requires the

community foundation to continue to hold the property if this retention is

important to the achievement of charitable or other similar purposes in the

community because of the peculiar features of the property.

b. E.g. a private foundation transfers a woodland preserve which is to be

maintained by the community foundation as an arboretum for the benefit of

the community. This restriction does not include a restriction on the

disposition of an investment asset or the distribution of income.

iv. Adverse factors. The presence of any of the following factors will be considered as

preventing the transferee from freely and effectively employing the transferred assets, or the

income derived therefrom, in furtherance of its exempt purposes: Treas. Reg.

1.507(a)(8)(iv).

1. Distributions. If the transferor reserves the right, directly or indirectly, to name the

persons to which the community foundation must distribute, or to direct the timing

of the distributions as, for example, by a power of appointment.

2. Other action or withholding of action. The terms of the transfer agreement, or any

expressed or implied understanding, required the community foundation to take or

withhold action with respect to the transferred assets which is not designed to

further one or more of the exempt purposes of the community foundation, and such



6

action or withholding of action would, if performed by the transferor private

foundation with respect to such assets, have subjected the transferor to tax under

chapter 42 (other than with respect to the minimum investment return requirement

of section 4942(e)).

3. Assumption of leases, etc. The community foundation, assumes leases, contractual

obligations, or liabilities of the transferor private foundation, or takes the assets

thereof subject to these liabilities (including obligations under commitments or

pledges to donees of the transferor private foundation), for purposes inconsistent

with the purposes or best interests of the public charity, other than the payment of

the transferor's chapter 42 taxes incurred prior to the transfer to the public charity

to the extent of the value of the assets transferred.

4. Retention of investment assets. The transferee community foundation is required

by any restriction or agreement (other than a restriction or agreement imposed or

required by law or regulatory authority), express or implied, to retain any securities

or other investment assets transferred to it by the private foundation. In a case

where such transferred assets consistently produce a low annual return of income,

the Internal Revenue Service will examine carefully whether the transferee is

required by any such restriction or agreement to retain such assets.

5. Right of first refusal. An agreement is entered into in connection with the transfer

of securities or other property which grants directly or indirectly to the transferor

private foundation or any disqualified person with respect thereto a right of first

refusal with respect to the transferred securities or other property when and if

disposed of by the public charity, unless such securities or other property was

acquired by the transferor private foundation subject to such right of first refusal

prior to October 9, 1969.

6. Relationships. An agreement is entered into between the transferor private

foundation and the transferee public charity which establishes irrevocable

relationships with respect to the maintenance or management of assets transferred

to the public charity, such as continuing relationships with banks, brokerage firms,

investment counselors, or other advisors with regard to the investments or other

property transferred to the public charity (other than a relationship with a trustee,

custodian, or agent for a community trust acting as such). The transfer of property

to a public charity subject to contractual obligations which were established prior

to November 11, 1976 between the transferor private foundation and persons other

than disqualified persons with respect to such foundation will not be treated as

prohibited under the preceding sentence, but only if such contractual obligations

were not entered into pursuant to a plan to terminate the private foundation status

of the transferor under section 507(b)(1)(A) and if the continuation of such

contractual obligations is in the best interests of the public charity.

7. Other conditions. Any other condition is imposed on action by the public charity

which prevents it from exercising ultimate control over the assets received from the

transferor private foundation for purposes consistent with its exempt purposes.

c. Failure to meet the above two tests (creation and material restrictions) results in a contribution to a

“noncomponent fund”, i.e. a separate trust, not-for-profit corporation or association that is generally

treated as a separate private foundation. Treas. Reg. § 1.170A-9(f)(14)(i).



7

V. Donor-Advised Funds.

a. Background: The majority of clients choose to set up donor-advised funds to accomplish their

philanthropic goals. A donor-advised fund offers the opportunity to create a low-cost, flexible

vehicle for charitable giving that places almost no administrative burdens on the donor while

allowing them to retain control over the grantees from the fund.

A donor-advised fund can function essentially as a private foundation. The fund agreement

serves the same purpose as a Certificate of Formation for a private foundation. The Advisory

Committee can adopt bylaws as the governing rules for its operation, including setting out meeting

requirements, advisory committee members, number of committee members, and subcommittees.

As one client who created a donor-advised fund instead of a private foundation once remarked,

“My family wants to do the fun part of this—the grant-making—and not the work part dealing with

lawyers, CPA‟s, and investment people.” (See Exhibit A for an example of a fund document and

bylaws the advisory committee can adopt.)

The 2006 Pension Protection Act introduced the terms “donor advised fund” and “sponsoring

organization” and enacted or amended various excise taxes designed to penalize improper acts of

donor advised funds and their sponsoring organizations, donors, and advisors.

i. Taxes imposed:

1. § 4966: tax on improper distributions made by sponsoring organizations

2. § 4958: excess benefit transactions

3. § 4967: taxes imposed on donors and others whose advice to a donor advised fund

results in an improper benefit

4. § 4943: taxes imposed on excess business holdings

ii. Definition of sponsoring organization:

1. Any organization that:

a. is described in § 170(c) as a permissible donee (other than in § 170(c)(1)

and without regard to §170(c)(2)(A));

b. is not a private foundation (as defined in §509(a)); and

c. maintains one or more donor advised funds.

2. Therefore, for the purpose of this paper, a community foundation, if properly

structured, is a sponsoring organization.

iii. Definition of Donor Advised Fund: The three important concepts of a donor advised fund

are separate identification of contributions, ownership and control by a sponsoring

organization, and advisory privileges in a donor. All three prongs of the three-prong

definition below must be satisfied in order for a fund to be treated as a donor advised fund.

§ 4966(d)(2)(A). A donor advised fund is a fund or account:

Refer to

Exhibit A



8

1. Separately identified by reference to contributions of a donor or donors. For

purposes of this first prong, funds may be separately identified by: 2

a. naming the fund after a donor; or

b. treating a fund on the books of the sponsoring organization as attributable

to funds contributed by a specific donor or donors.

2. Owned and controlled by a community foundation; and

a. If for some reason a fund is owned or controlled by a donor, there is no

completed gift for purposes of § 170.3

3. Advisory privileges: with respect to which a donor, or the donor‟s designee has, or

reasonably expects to have, advisory privileges regarding the distribution or

investment of any amounts held in the fund.

a. The term “advisory privileges” is not defined in § 4966 or elsewhere in the

Code. According to the Technical Explanation, advisory privileges are

distinguished from legal rights or obligations. For example, if a donor‟s

contribution to a sponsoring organization is subject to specific, enforceable

rights with respect to the gift, the donor is not treated as having advisory

privileges.4

b. A donor‟s advisory privileges must arise by virtue of the donor‟s status as a

donor. This is an important limitation because a donor to a sponsoring

organization may also be an officer, employee or trustee of the sponsoring

organization.

i. According to the Technical Explanation, if a donor is also a trustee

of the sponsoring organization, the donor may provide advice in the

donor‟s capacity as trustee with respect to the distribution or

investment of a fund to which the donor contributed without

possessing advisory privileges in the donor‟s capacity as a donor.5

ii. In contrast, if a donor, by reason of a contribution to a fund, secures

an appointment on a committee of the sponsoring organization that

advises how to distribute or invest the fund, the donor may have a

reasonable expectation of advisory privileges, even though the

donor is also an employee, officer, or director of the sponsoring

organization.6

iv. Exceptions to Treatment as a Donor Advised Fund under § 4966: The PPA enacted or

amended various excise taxes designed to penalize improper acts of donor advised funds

and their supporting organizations, donors, and advisors. Therefore, exception from

2 BNA- Taxes Associated with Donor Advised Funds: Staff of J. Comm. On Tax‟n, 109th Cong., “Technical Explanation of H.R. 4, the „Pension Protection Act of 2006‟” 342-43 (J. Comm. Print 2006). 3 Id. at 343. 4 Id. at 343-345. 5 Id. 6 Id.



9

treatment as a donor advised fund may have favorable tax consequences. A Donor Advised

Fund does not include a fund or account: § 4966(d)(2)(B).

1. that makes distributions only to a single identified organization or governmental

entity, or

2. with respect to which a donor or designee advises as to which individuals receive

grants for travel, study or other similar purposes if:

a. the donor‟s advisory privileges are performed exclusively by such donor in

his capacity as a member of a committee appointed by the sponsoring

organization,

b. no combination of a donor and persons related to or appointed by such

donor control such committee, and

c. all grants from such fund or account are awarded on an objective and

nondiscriminatory basis pursuant to a procedure approved in advance by

the board of directors of the sponsoring organization and such procedure is

designed to satisfy the requirements applicable to private foundations

under Section 4945(g) with respect to grants made for travel, study or

similar purposes. § 4966(d)(2)(B). The requirements applicable to private

foundations are listed below: I.R.C. § 4945(g)

i. The grant constitutes a scholarship or fellowship grant that would

be subject to the provisions of § 177(a) and is to be used for study at

an educational organization described in § 170(b)(1)(A)(ii).

ii. The grant constitutes a prize or award that is subject to the

provisions of § 74(b) (without regard to §74(b)(3)), if the recipient

of the prize or award is selected from the general public; or

iii. The purpose of the grant is to achieve a specific objective, produce

a report or other similar product, or improve or enhance the literary,

artistic, musical, scientific, teaching, or other similar capacity, skill,

or talent of the grantee.

3. Additional Exceptions Authorized: In addition to the two exceptions described

above, other funds or accounts that do not qualify for one of the exceptions may be

exempted from treatment as a donor advised fund by the Secretary if: §

4966(d)(2)(3).

a. the fund or account is advised by a committee not directly or indirectly

controlled by the donor or any person appointed or designated by the donor

for the purpose of advising with respect to distributions from such fund

(and any related parties); or

b. the fund benefits a single, identifiable charitable purpose.

v. Definition of Fund Manager: The term „fund manager‟ means, with respect to any

sponsoring organization-



10

1. An officer, director, or trustee of such sponsoring organization (or an individual

having powers or responsibilities similar to those of officers, directors, or trustees

of the sponsoring organization), and

2. with respect to any act (or failure to act), the employees of the sponsoring

organization having authority or responsibility with respect to such act (or failure

to act).

b. Taxable Distributions- Section 4966:

i. Background: The 2006 PPA enacted §4966, which imposes taxes on certain distributions

by donor advised funds. Section 4966 is effective for taxable years beginning after August

17, 2006. § 4966(d)(2)(B).

ii. Definition: The term “taxable distribution” means any distribution from a donor advised

fund:

1. to any natural person, or

2. to any other person if:

a. Such distribution is for any purpose other than one specified in section

170(c)(2)(B) (religious, scientific, literary, educational, or other charitable

purpose), or

b. the sponsoring organization does not exercise expenditure responsibility

with respect to such distribution in accordance with Section 4945(h). The

expenditure responsibility referred to is carried over from the rules that

apply to private foundations. Expenditure responsibility in this context

means that the sponsoring organization is responsible to exert all

reasonable efforts and to establish adequate procedures to: § 4945(h).

i. see that the grant is spent solely for the purpose for which made,

ii. obtain full and complete reports from the grantee on how the funds

are spent, and

iii. make full and detailed reports with respect to such expenditures to

the Secretary.

iii. Exceptions: A distribution to any of the following organizations is exempted from the

scope of the term “taxable distribution”:

1. any distribution from a donor advised fund to any organization described in Section

170(b)(1)(A)(other than a disqualified supporting organization)

a. Organizations described in Section 170(b)(1)(A): Includes churches;

certain educational organizations; organizations which provide medical

care, hospital care, medical education, or medical research; organizations

which receive government funds for the benefit of universities or colleges;



11

a state, possession or political subdivision of the United states; a

corporation, trust, community chest, or foundation; a private foundation

(see § 170(b)(1)(A) for complete list).

b. Disqualified supporting organization: See § 4966(d)(4) for definition.

2. to the sponsoring organization of such donor advised fund, or

3. to any other donor advised fund.

iv. Tax Imposed:

1. Tax on Sponsoring Organization: 20% of the amount of a taxable distribution. §

4966(a)(1).

2. Tax on Fund Management:

a. 5% of the amount of a taxable distribution is imposed on the agreement of

any fund manager who agreed to the making of the distribution, knowing

that it is a taxable distribution.

b. If more than one fund manager is liable, the liable managers shall be jointly

and severally liable.

c. The maximum amount of tax that can be imposed on the fund management

for any one taxable distribution is limited to $10,000.

v. Abatement of Taxes: the following two factors must be established to the satisfaction of the

secretary in order to abate the taxes under Section 4966: § 4962(a).

1. a taxable event was due to reasonable cause and not due to willful neglect; and

2. the taxable event was corrected within the correction period.

c. Taxes on Prohibited Benefits: I.R.C. § 4967.

i. In general: Taxes under this section are effective for taxable years beginning after August

17, 2006. P.L. 109-280, §1231. Generally, this section imposes a tax on the persons

described in § 4958(f)(7) and fund managers who receive a more than incidental benefit as

a result of a distribution based on their advice.

ii. More Than Incidental Benefit: According to the Technical Explanation of the 2006 PPA,

there is a more than incidental benefit if, as a result of a distribution from a donor advised

fund, a person described in §4958(f)(7) with respect to the fund receives a benefit that

would have reduced or eliminated a charitable contributions deduction if the benefit was

received as part of the transaction.7

iii. The tax as applied to those described in § 4958(f)(7): In general, section 4958(f)(7)

describes donors with advisory privileges and related individuals and entities.

7 Staff of J. Comm on Tax'n, 109th Cong., “Technical Explanation of H.R. 4, the „Pension Protection Act of 2006'” 350 (J. Comm. Print 2006).



12

1. Who? Persons described in § 4958(f)(7):

a. A person described in § 4966(d)(2)(A)(iii)-- Someone who has, or

reasonably expects to have, advisory privileges regarding the distribution

or investment of any amounts held in the donor advised fund;

b. A member of the family of someone who has, or reasonably expects to

have advisory privileges regarding the distribution or investment of any

amounts held in the donor advised fund; or

c. is a 35% controlled entity as defined below:

i. A corporation in which a donor or a family member of the donor (as

described above) own more than 35% of the total combined voting

power,

ii. A partnership in which such persons own more than 35% of the

profits interest, or

iii. A trust or estate in which such persons own more than 25% of the

beneficial interest.

iv. Constructive ownership rules: Rules similar to the rules of

paragraphs (3) and (4) of section 4946(a) shall apply for purposes of

this paragraph.

2. When? When on the advice of a person described above a sponsoring organization

makes a distribution from a donor advised fund which results in the person or any

other person to which this section applies receiving, directly, or indirectly, a more

than incidental benefit as a result of the distribution. § 4967(a)(1).

3. What? A tax of 125% of the benefit shall be paid by any person described above

who advises as to the distribution or who receives a benefit as a result of the

distribution. § 4967(a)(1).

iv. The Tax as Applied to the Fund Management. § 4967(a)(2).

1. Who? Any fund manager.

2. When? On the agreement of any fund manager to the making of a distribution,

knowing that the distribution would confer on him or her, directly or indirectly, a

more than incidental benefit.

3. What? A tax equal to 10 percent of the amount of the benefit shall be paid by any

fund manager who agreed to the making of the distribution.

v. Exception: No tax shall be imposed under this section with respect to any distribution if a

tax has been imposed with respect to the distribution under section 4958. § 4967(b).

vi. Special Rules: § 4867(c).



13

1. Joint and Several Liability: If more than one person is liable with respect to a

distribution, all persons shall be jointly and severally liable with respect to the

distribution.

2. Limit for Management: The maximum amount of the tax imposed on a fund

manager with respect to any one distribution shall not exceed $10,000.

d. Taxes on Excess Benefit Transactions: Taxes on excess benefit transactions may be imposed on

both donor advised funds and sponsoring organizations: § 4958.

i. Donor Advised Funds

1. Who? Disqualified Persons- Those described in Section 4958(f)(7), discussed

above with respect to Taxes on Prohibited Benefits. These persons are generally

donors with advisory privileges and related individuals and entities.

a. A person described in § 4966(d)(2)(A)(iii)-- Someone who has, or

reasonably expects to have, advisory privileges regarding the distribution

or investment of any amounts held in the donor advised fund;

b. A member of the family of someone who has, or reasonably expects to

have advisory privileges regarding the distribution or investment of any

amounts held in the donor advised fund; or

c. is a 35% controlled entity as defined above:

2. When? In general, the tax is imposed when one of the persons above receives an

excess benefit. The general rule of Section 4958(c)(1) applies to donor advised

funds, as well as an automatic rule in Section 4958(c)(2) that applies specifically to

donor advised funds.

a. General Rule: The term „excess benefit transaction‟ means any transaction

in which an economic benefit is provided by an applicable tax-exempt

organization directly or indirectly to or for the use of any disqualified

person if the value of the economic benefit provided exceeds the value of

the consideration (including the performance of services) received for

providing the benefit. For purposes of the preceding sentence, an

economic benefit shall not be treated as consideration for the performance

of services unless such organization clearly indicated its intent to so treat

such benefit. § 4958(c)(1)(A).

b. Automatic Rule: The term “excess benefit transaction” automatically

includes any grant, loan, compensation, or other similar payment from the

fund to a donor or donor advisor as described in Section 4958(f)(7). §

4958(c)(2)(A).

3. What?

a. On any disqualified person: a tax equal to 25% of the excess benefit. §

4958(a)(1).



14

i. In any case in which the excess benefit transaction is not corrected

within the taxable period, a tax equal to 200% of the excess benefit

involved will be imposed on the disqualified person. § 4958(b).

b. On any organization manager who participated in the transaction: §

4958(a)(2).

i. a tax equal to 10 % of the excess benefit is imposed on the

participation of any organization manager in the excess benefit

transaction

ii. if he or she knew that it is an excess benefit transaction.

ii. Sponsoring Organizations:

1. The general rule of § 4958(c)(1) applies to sponsoring organizations. For this

purpose, the following persons are treated as disqualified persons with respect to

any transaction involving a sponsoring organization: § 4958(f)(8)(A).

a. An investment advisor- any persons (other than an employee of the

sponsoring organization) compensated for managing the investment of, or

providing investment advice with respect to, assets maintained in donor

advised funds. § 4958(f)(8)(B).

b. a member of the family of an investment advisor; or

c. a 35% controlled entity meaning:

i. a corporation in which an investment advisor or a member of the

investment advisor‟s family owns more than 35% of the total

combined voting power;

ii. a partnership in which an investment advisor (or member of his or

her family) owns more than 35% of the profits interest; or

iii. a trust or estate in which an investment advisor (or member of his or

her family) own more than 35% of the beneficial interests.

2. Section 1242 of the Pension Protection Act also imposes special rules on

sponsoring organizations with regard to excess benefit transactions.

e. Taxes on Excess Business Holdings: I.R.C. § 4943.

i. Background: Section 4943 imposes taxes on the excess business holdings of a private

foundation. In 2006, the Pension Protection Act extended the application of § 4943 so that

Paragraphs (4), (5), and (6) of subparagraph (c) apply to donor advised funds. § 4943(e)(1).

1. For purposes of donor advised funds and Paragraphs (4), (5), and (6) of subsection

(c) of § 4943, the date August 17, 2006 (the date of the enactment of the Pension

Protection Act) is substituted for “May 25, 1969.” § 4943(e)(3)(A).



15

2. For purposes of donor advised funds and Section 4943(e)(4)(E), the date “January

1, 2007” shall be substituted for “January 1, 1970.” § 4943(e)(3)(B).

ii. Excess Business Holdings in General

1. Excess business holdings are determined with reference to the percentage of an

interest in a business enterprise owned by a private foundation. In general, the

permitted holdings in a corporate business enterprise are limited to 20% of the

corporation‟s voting stock. § 4943(c)(2)(A). When control of a business enterprise

can be shown to be in the hands of one or more persons who are not disqualified

persons with respect to the foundation, the permitted holdings may be increased to

a 35% interest. § 4943(c)(2)(B). In determining whether a private foundation has

excess business holdings, the percentage of holdings by disqualified persons is

taken into account. § 4943(c)(2)(A)(ii). Thus, under the general rule, the permitted

holdings of a private foundation in a corporate business enterprise would be 20% of

the voting stock reduced by the percentage of the voting stock owned by

disqualified persons. Disqualified persons are substantial contributors, foundation

managers, owners of a specified percentage of a substantial contributor, family

members, and entities that are owned by disqualified persons. §4946(a).

2. The tax is equal to 10% of the value of the excess business holdings for tax years

beginning after August 17, 2006. § 4943(a)(1). If the excess business holdings are

not disposed of within a specified time period, an additional tax of 200% of the

excess holdings is imposed. § 4943(b).

iii. Special Rules for Donor Advised Funds

1. Disqualified Person: With respect to donor advised funds, the term “disqualified

person” means any person who is:

a. described in Section 4966(d)(2)(A)(iii)- a donor who has, or reasonably

expects to have, advisory privileges with respect to the distribution or

investment of amounts held in such fund by reason of the donor‟s status as

a donor;

b. A member of the family of a donor described above, or

c. 35% controlled entity (as defined in section 4958(f)(3) by substituting

“persons described in subparagraph (A) or (B) of section 4943(e)(2)” for

“persons described in subparagraph (A) or (B) of paragraph (1)” in

subparagraph (A)(i) thereof). The term “35% Controlled Entity” means:

i. A corporation in which a donor or a family member of the donor (as

described above) own more than 35% of the total combined voting

power,

ii. A partnership in which such persons own more than 35% of the

profits interest, and

iii. A trust or estate in which such persons own more than 25% of the

beneficial interest.

http://taxandaccounting.bna.com/btac/display/link_res.adp?fedfid=4384549&fname=usc_26_4958_f_3_&vname=tm26usc



16

2. The rules in Sections 4943(c)(4), (5), and (6) now apply in the case of donor

advised funds.

a. Section 4943(c)(4): Sets forth a rule by which the allowable percentages of

ownership in business enterprises held on August 17, 2006, are slowly

lowered in three stages.

b. Section 4943(c)(5): Business holdings that a donor advised fund acquired

pursuant to trusts that were irrevocable on August 17, 2006, or under the

terms of a will executed on or before such date, can be disposed of under

the three-stage rule applicable to holdings on August 17, 2006.

c. Section 4943(c)(6): A donor advised fund has five years within which to

dispose of excess business holdings acquired by other than purchase by the

donor advised fund or a disqualified person, such as gifts or bequests of

business holdings.

f. Treatment of Charitable Contribution Deductions to Donor Advised Funds: Effective after

February 13, 2007, contributions to Donor Advised Funds are deductible for income, gift and estate

tax purposes unless the sponsoring organization is a 2555(a)(3)-(5) organization (i.e., war veterans

organization, lodge or cemetery corporation), or a Type III supporting organization that is not

functionally integrated. IRC § 170(f), 2522(c)(5) and 2055(e)(5). The Donor must obtain a

contemporaneous written acknowledgement from the sponsoring organization that the sponsoring

organization has exclusive legal control over the assets contributed. Id.

VI. Practical Considerations: How we use Community Foundations

a. Advantages of Donor-Advised Funds Over Private Foundations.

Many clients desire to create a private foundation, but do not take into account the expenses

and time involved with running a private foundation. Donor-Advised Funds (“DAF‟s”) provide

significant advantages over private foundations. See Attached Exhibit D.

DAFs share the tax-exempt status of the community foundation and do not have to

apply for tax-exempt status;

Tax deduction of up to 50% of AGI while the private foundation tax deduction is

limited to 30% of AGI;

The fund assets are professionally invested through the community foundation, while

still allowing the donor to make grant recommendations;

Private foundation self-dealing rules do not apply;

No required public disclosure of grants/anonymity available;

No annual taxes; and

The community foundation fulfills the associated fiduciary responsibilities while a

private foundation board has full fiduciary responsibility.

Refer to

Exhibit D



17

b. Endowments.

The endowment represents the margin of excellence for any non-profit organization. It ensures

the longevity of the organization and provides an extra source of income, outside of routine

operating donations.

An endowment is a fund made up of gifts and bequests that are subject to a requirement

that the principal be maintained intact and invested to create a source of income for an organization.

The endowment requires that the principal remain intact in perpetuity, or for a defined period of

time or until sufficient assets have been accumulated to achieve a designated purpose.

Many philanthropists wrestle with the lack of immediacy that accompanies an endowment. “I

could be helping so many kids today if that money weren‟t sitting in the bank.” “It would take 50

years of donations for the endowment to produce any meaningful income.” Our response: Modern

philanthropy is about choice. Today we are faced with an array of donors who often have very

different desires and instead of turning away donors, organizations should be focused on catering to

each and every donor, no matter how different. Painting with a broad brush, there are two main

types of donors—(a) those who desire to witness the results of their donations today (for example, a

donor who gives $x annually to support a specific child in India, or a donor who gives $x to fund

the building of a local orphanage), and (b) those who wish to support the longevity and the

excellence of an organization instead of just current operations. An endowment serves the latter

group and will only serve to increase an organization‟s donor base by attracting new types of

donors.

The simplest way to create an endowment is through a fund at a community foundation.

One of the endowments attached in Exhibit E was created in response to a client who desired to

build and maintain a library memorializing her mother. On her death, she wanted her estate to be

distributed to an endowment created for the purpose of supporting the library. Creating an

endowment at a community foundation accomplished the client‟s goals efficiently and effectively.

(It is noteworthy that the library is approximately 500 miles from the community foundation where

the fund was established.) There is one additional benefit to using a donor advised fund through a

community foundation— the client‟s organization is exposed to thousands of new donors.

c. How can Private Foundations Benefit from Community Foundations?

Among the people that we interviewed for this paper, one donor in particular brought up

two interesting uses of donor-advised funds for private foundations that he uses regularly.

First, to avoid the Section 4942 excise tax, a private foundation must make sufficient

“qualifying distributions” each year. A qualifying distribution is any amount paid to accomplish

one or more purposes described in Section 170(c)(1) or Section 170(c)(2)(B).8 However, a private

foundation might wish to postpone distributing to specific groups for various reasons. One solution

is for the private foundation to make its required distributions to a donor-advised fund at a

community foundation. Distributions by private foundations to community foundations constitute

“qualifying distributions” under Section 170(c)(2)(B). The private foundation satisfies its

distribution requirement and retains the ability to ultimately have its grants reach its intended

charities. Furthermore, the private foundation has successfully postponed making distributions to

specific groups.

8 §4942(g)(1)(A); Regs. §53.4942(a)-3(a)(2).

Refer to

Exhibit E

Practice

Tip

Keep kids

together;

separate

funds if

kids don’t

get along



18

Section 170(c)(2)(B) For purposes of this section, the term “charitable contribution” means

a contribution or gift to or for the use of— A corporation, trust, or community chest, fund, or

foundation. . . organized and operated exclusively for religious, charitable, scientific, literary, or

educational purposes, or to foster national or international amateur sports competition (but only if

no part of its activities involve the provision of athletic facilities or equipment), or for the

prevention of cruelty to children or animals;

Second, information about private foundations is public information and readily available.

However, a private foundation may make anonymous grants through a donor advised fund at a

community foundation.

One donor in particular runs a multi-million dollar foundation. His foundation, wary of the

troubled economy, decided to make the required distributions to a donor-advised fund in lieu of

making the distributions directly to specific donees. This action allowed the foundation to buy

some time while satisfying its distribution requirement. In addition, this particular donor is

relatively high-profile in his community and talked about how he often uses donor-advised funds

for making anonymous donations in order to avoid further solicitations and publicity.

d. Overseas Grant-making by a Private Foundation Through a DAF.

A client who owns a private foundation desired to contribute to his uncle‟s charitable

society overseas. However, the client did not want his private foundation to make the donation

directly to the relative in fear of being the sole and eternal supporter of the overseas society. He

therefore created a donor-advised fund at a community foundation in order to attract donors from

the community who have an interest in giving to causes in this particular country (See Exhibit F).

The rules applicable to overseas grant-making by private foundations follow.

Private foundations must follow specific rules when making grants to foreign charities. The

Pension Protection Act requires that international grants from donor-advised funds comply with

section 4945(h) of the private foundation rules. Section 4945(h) requires a private foundation to

make reasonable efforts to ensure that a grant to a foreign charity is spent for its intended purposes,

to obtain reporting from the grantee that shows how the funds were expended, and to provide

reporting about the grant to the IRS. This process is called “expenditure responsibility.” As an

alternative to expenditure responsibility, a private foundation can make a good faith determination

that the foreign organization is the equivalent of a U.S. public charity. This process is known as

“equivalency determination.” Different factors and circumstances will determine which option is

most appropriate and efficient. Some community foundations and some private foundations use

both out of an abundance of caution.

Expenditure Responsibility

Expenditure responsibility provides the most flexible and widely-used due diligence option for

international grant-making. It requires a private foundation to exercise the following oversight:

Conduct a pre-grant inquiry to make a reasonable determination that the intended

grantee is capable of fulfilling the charitable purposes of the grant.

Enter into a written agreement with the grantee that specifies the charitable purpose of

the activity to be funded and sets forth additional restrictions if required by law.

Require the grantee—unless it is a private foundation—to maintain the grant in a

separate account.

Refer to

Exhibit G for

Expenditure

Responsibility

and

Equivalency

Determination

Forms

Refer to

Exhibit F



19

Require the grantee to provide regular reports on the expenditure of the funds and the

accomplishment of the charitable activities supported by the grant.

Provide a report of the grant in its Form 990-PF that identifies the grantee and the

amount of the grant and briefly describes the charitable purpose and current status of

the grant.

Equivalency Determination

Equivalency determination is sometimes used by grant-makers that commit substantial or

long-term support to a foreign charity if it is not necessary or efficient to require a high-level of

continuous oversight until all the funds are expended. The disadvantage is that the process of

showing that the foreign grantee is the “equivalent” of a U.S. public charity can be administratively

burdensome and costly, and in some cases not possible for lack of the required documentation. In

brief, the process involves either obtaining a written legal opinion that the grantee is the equivalent

of a U.S. public charity or making the determination without assistance of legal counsel based on

information contained in an affidavit provided by the grantee. Under either option, substantial

documentation (in English) of the grantee‟s organization and operation will be required.

In order to ensure the occurrence of expenditure responsibility or equivalency

determination, we incorporated both into the Constitution of the overseas charitable organization.

This assures the private foundation that the overseas charitable organization will comply with

Section 4945(h).

e. Scholarship Funds.

Many private foundations were originally created by donors who wished to recognize

outstanding individual achievement through scholarships, grants or awards. However, since 1969,

the Internal Revenue Service has imposed complicated requirements on private foundation grants to

individuals. However, community foundations are exempt from these requirements and allow

donors to identify the type of individuals they wish to assist and the criteria to be used. The

community foundation then makes the grants in accordance with the criteria. Donors may stay

involved with the scholarship program through an advisory relationship or a committee to assist in

announcing the program and selecting the recipients. The community foundation handles any

necessary paperwork with academic institutions. This is a common function of community

foundations and they often administer funds geographically remote from their offices. See

Attached Exhibit H.

f. Donor Intent: Princeton and the Robertson Case and Orphan Trusts.

Much has been written about the litigation initiated by the Robertson family against

Princeton University. The Robertsons, who owned the old A&P grocery stores, donated $35

million to Princeton in 1961 to endow the Woodrow Wilson School of International and Public

Affairs. The next generation of the Robertson family sued Princeton on a variety of issues related

to misuse of the endowment funds. When the litigation settled in 2008 the total cost of the legal

fees and related costs exceeded $60 million. An excellent commentary on the case is attached as

Exhibit I.

Orphan trusts have also received much attention in the category of donor intent. The term

“orphan trust” describes a charitable trust that has an institutional trustee, such as a bank, but that

no longer has ties to the donor or members of the donor‟s family who could guide grant-making.

A recent New York Times article, written by Stephanie Strom, reported almost 4,000 such

Refer to

Exhibit H

Link to NY

Times

Orphan

Trusts

Article

Refer to

Exhibit I



20

foundations with assets over $5.4 billion. Not only are financial institutions are increasing their

fees to manage these funds, but many of these funds are away from their community of origin due

to bank mergers and therefore are not carrying out their original donors‟ intent. The New York

Times article, In Big Banks’ Hands, Trusts Often Give Fewer Grants, may be accessed at

<http://www.nytimes.com/2007/09/29/us/28cnd-foundation.html?_r=1&emc=eta1>.

Effectuating donor intent is a matter of compelling importance to donors and to charities.

One way to help ensure that a donor‟s intent is met is to have funds dispensed through a community

foundation fund. That approach puts an independent third party in the position of helping make

sure that the donor‟s intent is carried out.

g. Field of Interest Fund.:

Field of Interest Funds allow donors to create a fund that targets a particular charitable

interest, such as education, teen pregnancy, or a particular river or watershed. The community

foundation then tailors grants from the fund to fit the chosen interest. For example, if a donor

created a Field of Interest Fund to prevent drug abuse, the community foundation would research

and choose grant recipients with ties to the prevention of drug abuse and within any guidelines

specified by the donor. The community foundation then monitors the results and makes changes in

grantees accordingly. Field of Interest Funds are inherently flexible and can adapt to the changing

needs of any community.

VII. Practical Considerations: Other Issues

a. Fees: Community Foundations charge administrative fees and other fees. These fees are generally

nominal compared to the amount required if an individual fund had to recreate these services from

scratch. However, fees can differ dramatically from community foundation to community

foundation and for different services provided. The careful donor and careful professional advisor

should always get a clear understanding of fees charged by a particular community foundation

before creating a fund there.

b. Geography: Community Foundations focus on the improvement and growth of the local

community in which they are situated. With a relatively narrow focus, community foundations can

monitor changing conditions and respond accordingly. Donors particularly benefit from this

expertise when they create a Field of Interest Fund because the community foundation has the

knowledge and resources to make effective grants. However, many community foundations make

grants around the state, the country, and the world.

c. Perpetuity and Advisory Committees. Professional advisors should be aware that some community

foundations limit the number of years or generations that a donor can specify the members of

advisory committees. Most community foundations recognize that Donor Advised Funds are, in

effect, the equivalent of family foundations to donors and permit donors to specify the makeup of

advisory committees. Some community foundations limit the number of years a fund can exist.

Before creating a fund at a community foundation, a donor or professional advisor should

understand the foundation‟s policies about funds and advisory committees. If the policies do not

allow the donor to accomplish his or her goals, discussion should be had with other community

foundations that can be more accommodating.

d. Flexibility: Community Foundations are inherently flexible and illustrate the fact that modern

philanthropy is about choice. No two donors are identical and charitable planning is as unique for

http://www.nytimes.com/2007/09/29/us/28cnd-foundation.html?_r=1&emc=eta1



21

every donor as estate planning is to every client. An professional advisor will find that most

community foundations are very receptive to conversations about new projects or funds that they

have never encountered before. For example, when the fund referred to in subsection (d) of Section

VI, above, was being discussed, conversation was had with a very large community foundation in

the Midwest (because of a connection to an ethnic population there thought to be interested in the

fund). They had no interest because of the expenditure responsibility issues. A call was then made

to the Austin Community Foundation and they readily accepted the fund.

e. Publicity. One of the practical considerations for creating a fund at a community foundation that

the general public might contribute to is the opportunity for publicity. Many community

foundations have robust websites and email newsletters and many send out thousands of hardcopy

newsletters and annual reports. Each of those offers great opportunities for endowments,

scholarship funds, field of interest funds, and special project funds to get publicity that they could

never afford otherwise—and the opportunity for contributions they would never have otherwise.

f. Other Considerations. Many community foundations have user-friendly websites that facilitate

donations by use of credit cards. The ability of a new fund to receive donations via a website is

enormously helpful. The community foundation then handles the contributions and sends out the

required donor acknowledgement letters.

Community foundations normally share the grant applications they get from charities with

their respective Donor Advised Funds and with the community. That information is invaluable to

donors in making their contributions and grants.

One of the increasingly disturbing issues for local chapters of national public charities is

“shared fundraising agreements” forced on them by their national organizations. There has been

highly publicized litigation in Texas between local chapters and their national offices. In some

instances the agreements forced on the local chapters require them to send a percentage of the

donations they take in or, in some instances, all(!) of the donations go to the national office which

then returns what they think the local chapter needs to carry out its mission. Often the national

office prohibits the local chapter from affirmatively disclosing the shared fundraising agreement to

its donors. There are clearly very serious state law fiduciary liability issues for any board of

directors in that arrangement. Eventually there is likely to be legislative action to deal with this

issue.

However, one very effective way for a local chapter to keep at least a portion of its

donations under its control is to use a special project fund at a community foundation. The special

project fund can sponsor the chapter‟s golf tournament, art fair, or gala and all of the proceeds can

go into the fund—and be beyond the reach of the national office. Donors can be informed of the

fund and contributions can then be made to it, again, beyond the reach of the national office.

VIII. Conclusion

Community foundations offer a wide range of easy, low cost solutions to almost every charitable

planning issue imaginable. With community foundations located all over Texas and readily accessible to

professional advisors and their clients, professional advisors should have a basic working knowledge of

them for their wealthy and not-so-wealthy clients. While community foundations differ widely in Texas in

terms of focus, fees, sophistication, and flexibility, they have the unparalleled ability to assist professional

advisors in helping their clients meet their planning goals.

EXHIBIT A

DONOR-ADVISED FUND DOCUMENT AND BYLAWS

Charitable Planning For Clients Who Aren’t Wealthy: Ideas and Forms You Can Take Back to Your Office and Use Tomorrow Chapter 6

23

THE FAMILY FUND OF THE AUSTIN COMMUNITY FOUNDATION

FOR THE CAPITAL AREA

____________ donated the property described on Exhibit A to the Austin Community Foundation for the Capital Area on , 2012. That contribution is to be held by the Foundation as a Donor Advised Fund and distributed by it subject to the terms of this Agreement.

Name. The name of the Fund is "The _____ Family Fund".

Purpose. The Fund=s purpose is to make grants for charitable, educational, religious, and humanitarian purposes. and fully recognize that the purposes stated are broad and general and open to substantial discussion about how to best meet them. Those purposes are stated in general terms because they recognize that the Foundation and the Fund may be acting to implement those purposes many, if not hundreds, of years from now. The statement of those purposes accurately reflects their goals for the use of grants from the Fund. They are confident that regardless of the state of the country at any time in the future, there will always be a substantial need for charitable funds for the purposes of the Fund.

Advisorv Committee. The Fund shall have an Advisory Committee to advise the Foundation on the grants. The Advisory Committee shall have at least two (2) members. The initial members of the Advisory Committee are and _______ _

Endowment. Except as provided below, the Fund shall be a permanent endowment of the Foundation. The Foundation may distribute any amount up to five percent (5%) of the value of the Fund in any calendar year ("the distributable amount"). The value of the fund determined for the purpose of establishing the distributable amount shall be determined on the same date each year, unless the governing body of the Foundation determines that it is in the Fund=s best interest to change the date. The Advisory Committee may elect to recommend that grants be made ofless than the distributable amount and the excess grant money be held for distribution in subsequent years. In any calendar year any amount or all of the Fund=s distributable amount from previous calendar years may be distributed for the Fund=s purposes.

While and serve on the Advisory Committee and they are competent to act, grants may be recommended only with their approval. While serving on the Advisory Committee they may request the distribution of an amount greater than the distributable amount. If made, that request shall be made in writing directed to the Executive Director of the Foundation.

Other Terms. and understand and agree that the property they have donated to the Foundation and the income from it will be held in The _____ .Family Fund and used subject to the following conditions:

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24

a. All designated beneficiaries must either be exempt from federal income taxes under Section 50l(c)(3) of the Internal Revenue Code of 1986, as amended ("the Code"), or constitute a governmental unit referred to in Section 170(c)(l) of the Code. With respectto any distributions from the Fund which are to be made for a designated purpose, that purpose must be within the scope of the tax-exempt purposes of the Foundation.

b. Funds may be commingled by the Foundation=s Fiscal Trustees with other similar funds for investing and accounting.

c. At some time in the future the Foundation=s Board of Governors may determine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this Agreement is unnecessary, impractical, or impossible, or that the Agreement is not consistent with the tax-exempt purposes of the Foundation. In that case, the Foundation=s Board of Governors may order any variance from the Agreement and application of the whole or any part of the principal or income of the fund to other charitable, educational, religious, or humanitarian purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as feasible, the intents and purposes of this Agreement.

d. Determination of what constitutes "income" for purposes of distribution shall be reasonably determined by the Foundation and/or the Treasury Department=S Internal Revenue Service Regulations.

e. The Foundation=s acceptance of this Agreement, so far as permitted by law, shall constitute its agreement to hold, manage, and distribute the donation as set out above.

f. Provisions of the Foundation=s Articles of Incorporation as on file in the office of the Secretary of State, along with the Foundation=s Bylaws, as amended, shall be followed in carrying out this Agreement.

g. and acknowledge that they have been furnished with the written guidelines of the Foundation relative to "Donor Advised Funds" and they agree that the guidelines will be followed with respect to The Family Fund.

Executed to be effective __________ , 2012.

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THE ____ FAMILY FUND

---------' 2012

---------' 2012

AUSTIN COMMUNITY FOUNDATION FOR THE CAPITAL AREA

By: ____________ _

President

-----------' 2012

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EXHIBIT A

THE FAMILY FUND OF THE AUSTIN COMMUNITY FOUNDATION


Dated , 2012 --------

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BYLAWS OF THE FAMILY FUND OF

THE AUSTIN COMMUNITY FOUNDATION FOR THE CAPITAL AREA

ARTICLE 1

1.1 Name. The name of the Fund is "The _____ Family Fund". The Fund was created by _______ and _____ _

1.2 Purpose. The Fund's purpose is to make grants, solely from the distributable amount, as defined in the Fund Agreement, of the Fund, to be made in the Austin, Texas area. Grants shall be made for charitable, educational, religious and humanitarian purposes.

The Donors recognize that the purposes stated are broad and general and open to substantial discussion about how to best meet them. Those purposes are stated in general terms because they recognize that the Foundation and the Fund may be acting to implement those purposes many, if not hundreds, of years from now.

ARTICLE2

ADVISORY COMMITTEE

2.1 Number and Qualifications. The Advisory Committee shall have at least two (2) members. The initial members of the Advisory Committee are ______ _

________ ,and_~-------

2.2 Majority Vote of Members. The vote ofthe majority ofthe Advisory Committee members present, or represented by proxy, at a meeting at which a quorum is present, shall be the act of the members meeting.

2.3 Voting. Each member shall be entitled to one (1) vote on each matter submitted to a vote of the Advisory Committee. A member may vote in person or may vote by proxy executed in writing by the Advisory Committee member. No proxy shall be valid after one (1) month from the date of its execution. Any proxy shall be revocable.

2.4 General Powers. The Advisory Committee shall recommend to the Grants Committee of the Foundation the grants to be made from the Fund. All recommendations are advisory only, and will not be binding on the Board of Governors of the Foundation, which legally must retain final responsibility for all distributions made from the Foundation. The members of the Advisory Committee have no power or authority to incur expenses, liabilities, or other obligations on behalf of the Foundation or the Fund.

1

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28

2.5 Increase or Decrease in Number of Committee Members. The number of Advisory Committee members may be increased or decreased from time to time by amendment to these Bylaws, but (except as provided in paragraph 2.6) no decrease shall have the effect of shortening the term of any incumbent Advisory Committee member.

2.6 Election and Vacancies. The Advisory Committee shall be a self-perpetuating body. The Committee will elect a Chair to a two (2) year term and the Vice-Chair to a two (2) year term. The Chair may be reelected to any number of terms. The Chair=s duties shall include but not be limited to presiding over meetings of the Advisory Committee. The Vice-Chair shall act in the Chair=s absence.

Upon the resignation, death, or refusal of an Advisory Committee member to serve, his or her successor shall be elected by the affirmative vote of a majority of the other members of the Advisory Committee or by the sole remaining member of the Advisory Committee, even ifless than a quorum of the Advisory Committee, and vacancies and new members of the Advisory Committee shall be filled in the same manner. Except as may be provided in the following sentence, the original terms of the members of the Advisory Committee shall be for life. and ____ _ ___ acting together, or either of them acting alone if the other is deceased or incapacitated, shall have the power to (i) appoint additional members to the Advisory Committee and (ii) to remove any or all members of the Advisory Committee without the approval of the Foundation. Except as provided in the previous sentence, appointment or removal of Advisory Committee members shall be in a written, notarized instrument signed by a majority of the Advisory Committee and delivered to the Executive Director of the Austin Community Foundation.

A vacancy shall be declared in any seat on the Advisory Committee upon the death or resignation of a member, or upon the disability of any member rendering him or her incapable of participating in the activities and duties ofthe Advisory Committee. In the event all members of the Advisory Committee die, resign, become incapable of serving due to disability or refuse to serve and no successor members have been appointed, the Board of Governors of the Foundation shall elect, by majority vote, successors to fill the vacancies on the Advisory Committee.

2.7 Place ofMeetings. Meetings of the Advisory Committee, regular or special, may be held in the State of Texas or otherwise.

2.8 Regular Meetings. The Advisory Committee shall hold regular meetings at least annually, and the dates of meetings shall be determined by the Advisory Committee. Regular meetings of the Advisory Committee may be held upon any notice and at any time and at any place as shall from time to time be determined by the Advisory Committee.

2.9 Special Meetings. Special meetings of the Advisory Committee may be called by the Executive Director of the Foundation or any two (2) members of the Advisory Committee. Notice of each special meeting of the Advisory Committee shall be given to each member of the Advisory Committee at least two (2) days before the date of the meeting.

2



29

2.10 Quorum of Advisory Committee Members; Majority Vote. At all meetings ofthe Advisory Committee, the presence in person (but not by proxy) of a majority of the number of members of the Advisory Committee shall constitute a quorum for the transaction of business. The act of the majority of the members of the Advisory Committee present in person or by proxy at any meeting at which a quorum is present shall be the act ofthe Advisory Committee, unless the act of a greater number is required by these Bylaws. If a quorum is not present at any meeting of the Advisory Committee, the members of the Advisory Committee present in person may adjourn the meeting, without notice other than announcement at the meeting, until a quorum is present.

2.11 Compensation. The members of the Advisory Committee shall serve without compensation; however, the members may be reimbursed for their expenses reasonably incurred in connection with the performance of their duties.

ARTICLE3

AMENDMENTS

3.1 Amendment to Bylaws. The Advisory Committee may amend or repeal these Bylaws, or adopt new Bylaws by majority vote at a meeting with a quorum, subject only to the written approval ofthe Board of Governors ofthe Foundation.

ARTICLE 4

LIABILITY

4.1 Members of Advisorv Committee Not Liable. The members of the Advisory Committee shall not be liable for any action taken or omitted to be taken by the Foundation, its Board of Governors, or employees in connection with the Fund. The members of the Advisory Committee serve only in an advisory capacity and (i) have no voice in the investment ofthe assets of the Fund and (ii) can only advise the Foundation on grants. Therefore, the members of the Advisory Committee have no fiduciary obligations with respect to the Foundation or the Fund. However, the members of the Advisory Committee do have the obligation to diligently discharge the obligations set out in these Bylaws, even though their service as members of the Advisory Committee is without liability.

Adopted by the Advisory Committee on _________ , 2012.

3



30

Give Receive donors & advisors grants & scholarships

DAFFUND

WELCOME TO THE AUSTIN COMMUNITY t~()UNDATION

We look forward to making your giving easy, flexible and effective.

Please complete this Fund Agreement form to establish a Donor Advised Fund ("Funcn with an irrevocable gift to tho Austin Community Foundation (tho "Foundation").

Donor Advised Funds allow tho Donor (or Advisors selected by the Donor) to recommend grants from tho Fund to public charities and governmental entities.

Further information about this Fund Agreement is conta'1nod In tho publication. Tho Charitable Giving Guide, available from tho Foundation and also available online. For more information, please contiilct the Foundation at 512.472.4483.

~~''""'""'"' fund 1.) name the fund Please choose a name for the Fund. Grants made to charities are accompanied by a letter which includes the Fund niilme (e.g. The Jane and James Smitl1 Family Fund) and the name and address of tho Donor Advlsor(s) recommending the grant

0 Check hen" to authorize the Foundation to use the Fund narne in Foundation materials. Allowing us to do so will not only recognize the Donor's participation, but will encourage others to follow the Donor's example.

Check here if the Donor wishes all grants From the Fund to rnmiilin Anonymous.

If the Donor Advisors wisll to make occasional anonymous grants from the Fund, please notify the Founded/on when recommending the grant,

Please provide contact information for tho Donor(s) to tho Fund.

DONOH 1 FULL NAME

HOME ADDHESS

HOME CITY, STATE, ZIP

DATE OF BIRTH

RELATIONSHIP TO DONOR 1

BUSINESS OH ORGANIZATION NAME

POSITION

BUSINESS ADDRESS

About austin comrnunity foundation

f·l.eeeive our Emaii Nb:wsle!ttlr

Privacy ily I:!1V S<~fe:tlt.!l:~$letiltfl»'


31

BUSINESS CITY, STATE, ZIP

HOME PHONE

BUSINESS PHONE

DONOR 1 EMAIL

Where should I lOME

HOME ADDRESS


DATE OF BIRTH

RELATIONSIIIP TO DONOR 2

BUSINESS OR ORGANIZATION NAME

POSITION

BUSINESS ADDRESS


HOMC PHONE

BUSINESS PHONE

DONOR 2 EMAIL

WI'Jere should they be contacted? HOME OFFICE

3.) contributions Indicate the amount of the initial contribution and how it Is being paid, Additional plfts can be made at any time, If making a contribution of multiple securities or assets, please attach pages as needed,

Check for

Mutual Fund Shares·(?) shares of(?)

Chapter 6

32

0 Closely held stock, Partnership, LLC interest

D Real Estate (Please contact tho Foundation about any gift of real estate)

L~l IRNRetirament Plan/Life Insurance (Attach copy of your Beneficiary Designation Form below)

(] Bequest. or other deferred gift

0 Other

4.) advisor information Please designate Advisors to t11e Fund.

Each Advisor of this Fund has privileges to make recommendations appropriate tor the Fund. All Fund correspondence will be sent to Advisor 1, unless otherwise specified. Wl1on tho Advisors listed below aro persons acting on behalf of nonprofit corporations, business entities or other enterprises, one of tho following must be attacl1ed to this Agreement: (i) a board resolution, (ii) oflicor's certificate, or (iii) other appropriate documentation setting forth the autllority of the individuals CJxecuting this Agreement to ;,1c! on behalf of the entity. Please see the Charitable Giving Guide for further information.

Ploase chock the box that is applicable.

Donor(s) will serve as tho only Advisor(s)

Donor(s) and the additional persons named below will serves as Advisors to the Fund

the persons named below will serve as Advisors to the Fund

Donor(s) will not serve as Advisors to the Fund

ADVISOR 1 FULL NAME

HOME ADDRESS

I lOME CITY, STATE, ZIP

DATE OF BIRTH

HELATIONSHIP TO DONORS


POSITION

BUSINESS ADDRESS


HOME PHONE

BUSINESS PHONE

E.-MAIL

Where would they like to be contacted

HOME OAT OFFICE

5.) type fund Endowed: An Endowf>d Fund is a permanent, legacy Fund. Its assets are Irrevocably held by the Foundation and <1re managed to

Chapter 6

33

accomplish the designated charitable purposes. Endowed Funds are designed to preserve the gift in perpetuity, so only the Available to Grant amount can be used for distribution.

Determination of amount Available to Grant for Endowed Funds is based upon the spending policy of tl1a Foundation as established by the Board of Governors frorn time to time. The current spending policy as ostHblished by the Board of Governors is that fivo percent (5%) of the Fund's value as of December 31 each year shall be the available to Grant amount in the following year. If for any reason, the Available to Grant amount is not distributed in a single year. any remaining balance will continue to be available for grantmaking, plus the annual calculation of the amount Available to Grant will be added to such remaining balance.

Quasl·endowod: A Quasi··endowed Fund Is treated like an endowment fund for Investment purposes, all of the income and principal of the Fund are available for distribution.

NotHmdowod: A Non ·endowed Fund is not invested by the Foundation in Its investment pools. The amount available for distribution equal the amount of all gifts received less any grant distributions that have been made. All amounts in the Fund are available for distribution.

Please choose whether the Fund will be Endowed, Quasi .. endowed or Non·endowed.

plan Donors may request that portions of tho Fund be administered in any or all of the following ways upon tho death or incapacity of tho Fund'H last surviving Donor Advisor. Total of porcontnges should equal i 00. Donors may make El succession plan at any time or change any succession plan at any time.

0 Donors do not wish to make a succession plan at this time.

Let the Foundation's Board of Governors make the decisions about where grants should be rnade each year from the Fund."

*If the Donors have a preference for a specific area of interest, population or cause (e.g. artG and culture. low·income children. domestic list:

% of Fund V<;lue

Transfer advisory privileges of this Fund to Successor Advisor( a) listed in Section 7

% of Fund Value

Create an Endowed Designated Fund for the benefit of tho organLzation(s) named below. Should you have additional organizations, please attach a list below.

%of Fund

Q.rganization 1

% of Amount Availablo to Grant that Organization 1 is to receive each year

ORGANIZATION 1 NAME

ADDRESS

LIN#

Chapter 6

34

% of Amount Available to Grant that Organization 2 is t<J receive each year

ORGANIZATION 2 NAME

ADDRESS

CITY, STATE, ZIP

EIN #

ORGANIZATION 3 NAME

ADDRESS

CITY. STATE. ZIP

EIN II

Attach a list of additional organizations for the Endowed Designated Fund if needed.

~~!.!\E~) no file selected

successor If, in Section 6, the Donors selected the box to transfer advisory privileges to Successor Advisors, please complete this section.

Successor Advlsor(s). Donors rnay designate one or more Individuals to serve as Successor Advlsor(s) for the Fund after the de<lth or Incapacity of the initial Advisors. Successor Advisor(s) have privileges to rnake recommendations appropriate for the Fund. All Fund correspondence will be sent to Successor Advisor 1, unless otherwise specified.

SUCCESSOR ADVISOR 1 FULL NAME

HOME ADDRESS

HOME CITY, STATE. ZIP

DATE OF BIRTH



POSITION

BUSINESS ADDRESS


HOME PHONE

BUSINESS PHONE

Chapter 6

35

E··MAIL

Successor Advisor 2

HOME ADDRESS


DATE OF EliRTII



POSITION


HOME PHONE

BUSINESS PHONE

E·MAIL

8.) support The Foundation's operating costs are covered by service charges and the generosity of caring donors. We invite you to become a Power of Giving Partner and consider a contribution to the Foundation's operations. Your gift will ensure that the Foundation will continue to be responsive to changing community needs.

Plonse, select ono of the options b(>iow: or$ _ from my fund balance annually*

9.) The Foundation receives grant requests from area non·profit oroanizations throughout the year. If you are willing to consider requests receiw>d by the Foundation from time to tirne that fit within your areas of interest, pleHse check tt1e box at the end of this Section if you are interested in more information about this opportunity.

Yes, please send rne more information, including the charitable interest survey, about t11e possibility of receiving summaries of funding requests received by the Foundation.

1 0.) nrn!r<:><>t:t

If you me working with a financial, tax or estate planning advisor, please complete the following:

Chapter 6

36

PROFESSIONAL ADVISOR NAME

FIRM NAME

CITY, STATE, ZIP

BUSINESS PHONE

E·MAIL

11.) other Charitable Giving Guide: The undersigned have received and reviewed the Charitable Giving Guido and agree to the terms thereof Tho undersigned homby certify that all information presonted in connection with this application is accurate to tho best knowledge of the undersigned and will promptly notify tho Foundation in writing of nny changes.

Service Charges: Austin Community Foundation will receive as compensation for its services in investing, administering and distributing tho funds hereunder, the sorvico charges customarily applied, applicable at the time of the performance of such services.

Succession Plans: In the event that tho undersigned shall not have designated Successor Advisors or rnado a succession plan for t11o r=und after tho death or incapacity of !11e initial Advisors (see Section 6 of this Agreement), then the succession plan shall be that the Fund will become an unrostrioted fund of tho Foundation from whicl1 !he Board of the Foundation willmako distributions to benefit tho community.

Investments: The undersigned acknowledne and agree that IRS regulations enable Donor Advisor(s) to designate investmfJnt preferences when the Fund is established but require tho Foundation to retain final discretion regarding those preferences. The llndersigned understand that Investments will be administered in accordance with the policies of Austin Community Found&1tion. The undersigned acknowledge that investments are subject to market and interest rate fluctu<:1lion risks, and that any gain or loss generated by the above investments will be credited or char1)ed to the Fund. The total investment return of each mutual fund is net of Its operating expenses.

Indemnity: In consideration of the Foundation's creation of a Fund at the request of tho individual(s) or entity narned and for good and valuable consideration, such individual or entity hereby agrees to indemnify and hold harmless the Foundation against uny liability, cost or expense which the Foundation may incur by reason of its acting upon instructions or recommendations given to the Foundation by any of the authorized persons named.

Variance Power: It Is understood that the Fund to be established pursuant to this agreement will be subject to tho provisions of the Articles of Incorporation and Bylaws of the Foundation, including the power reserved by the Board of Governors to modify any condition or restriction on tho distribution of funds iflnlts sole judgment (without the approval of any trustee, custodian, or agent), such restriction or condition becomes, in effect, unnecessa1y, Incapable of fulfillment, or inconsistent with the charitable needs of the area sorved by the Foundation.

12.) your Please onter your information (the form submitter) below.

YOUR NAME

form submissions will also be ernailed to this address.)

Home 1 Privacy Statement 1 About Us 1 Giving 1 Grants 1 Funds 1 Library 1 FAQ 1 Contact Us

Copyright© 2003, 2012 Austir1 Community Foundation. • Privacy statement • Site created by Digital Cheetah. ACF Staff Login

Chapter 6

37

EXHIBIT B

MAP OF TEXAS COMMUNITY FOUNDATIONS


38

Community Foundations in Texas


39

EXHIBIT C

LIST OF TEXAS COMMUNITY FOUNDATIONS AND CONTACT

INFORMATION


40

I

Search Results - South Region - Texas

•~g w.1n~~ilt 1 • ThE:~ Community Foundation of Abilene +• •~~~\lm:M*

Address

P.O. Box 1001 500 Chestnut Street, Suite 1634 Abilene, TX 79604-1001

Contact

Phone: 325/676-3883 Fax: 325/676-4206 Contact: Katie Alford , President

Address

801 S. Fillmore, Suite 700 Amarillo, TX 79101

Contact

Phone: 806/376-4521 Fax: 806/373-3656 Contact: Ms. Angela K. Lust, Senior Vice President

Address

P.O. Box 5159 4315 Guadalupe, Suite 300 Austin, TX 78763-5159

Contact

Phone: 512/472-4483 Fax: 512/472-4486 Contact: MariBen Ramsey JD, Vice President & COO, General Counsel


41

an affiliate of San Antonio Area Foundation

Address

P.O.Box 1656 Bandera, TX 78003

Contact

Phone: 830/535-6982

• Big Spring Area Community Foundation

Address

P.O. Box 1030 Big Spring, TX 79720-1030

Contact

Phone: 432/263-7676 Fax: 432/263-8686 Contact: Drew Mouton, JD, Board Member/Secretary

Address

P.O. Box 2392 Angleton, TX 77516-2392

Contact

Phone: 979/848-2628 Fax: 979/848-0031 Contact: Barbara Franklin , Executive Director

• Ikazos ~ommunity Fonngation

Address

Post Office Box 2622 Bryan, TX 77805-2622

Contact

Phone: 9791776-4341 Fax: 979/776-8699 Contact: Mr. Derek Dictson, President E-Mail: derek@cfbv .org

Chapter 6

42

• .Brownsville Community Fmmdation, .Inc.

Address

275 Jose Marti Blvd., Suite B Brownsville, TX 78526-1746

Contact

Phone: 956/546-8787 Fax: 956/546-8262 Contact: Elvira Ramos, Executive Director E-Mail: [email protected]

• Chautaqua Foundation, Inc.

Address

801 West Gibson Austin, TX 78704

• Coastal Bend Communitx Foundation

Address

600 Leopard Street, Suite 1716 Corpus Christi, TX 78473-1111

Contact

Phone: 361/882-9745 Fax: 3611882-2865 Contact: Ms. Karen Selim, President & CEO E-Mail: kselim<i'ilcbcfoundation.org

Ill ~#<T#O~At I • The Dallas Foundation 2 ~a1ma·

Address

Reagan Place at Old Parkland 3963 Maple Ave., Ste. 390 Dallas, TX 75219

Contact

Phone: 2141741-9898

Chapter 6

43

Fax: 2141741-9848 Contact: Mary M. Jalonick, President E-Mail: [email protected]

• Denison Community Foundation

Address

313 West Woodard Denison, TX 75020

Contact

Phone: 903/465-1551

• l.\3ast Texas Communities Foundation

Address

315 N. Broadway Suite 210 Tyler, TX 75702

Contact

Phone: 903/533-0208 Fax: 903/533-0258 Contact: Kyle L. Penney , President/CEO

Address

P.O. Box 272 El Paso, TX 79943-0272

Contact

Phone: 915/533-4020 Fax: 915/532-0716 Contact: Eric Pearson , President

Address

P.O. Box 3092 Beaumont, TX 77704-3092

Contact

Chapter 6

44

Phone: 409/833-5775 Fax: 409/833-7885 Contact: Carol Flatten, Executive Director

Address

116 West 8th Street Suite 105 Georgetown, TX 78626-5800

Contact

Phone: 512/863-4186 Fax: 512/863-4223 Contact: Mrs. Julie Johnson, Project Manager E-Mail: juliejohnsonC{i:'chisholm -trail.org

• Heart of Texas Community Foundation

Address

301 Junction Highway Kerrville, TX 78028

Contact

Phone: 830/792-1703 Fax: 830/792-3045

Address

5120 Woodway Dr., Ste 6000 Houston, TX 77056

Contact

Phone: 713/333-2200 Fax: 713/333-2220 Contact: Stephen D. Maislin , President & CEO E-Mail: [email protected]

• Laredo Area Community Foundation

Chapter 6

45

Address

P.O. Box 450223 Laredo, TX 78045

Contact

Phone: 214/528-8185 Contact: Elizabeth R. Sames , Board

an affiliate ofL.ubbock Area Foundation, Inc.

Address

CHASE P.O. Box 1631 Levelland, TX 79336

Contact

Phone: 806/897-2605

• Lubbock Area Foundation, Inc.

Address

2509 80th Street Lubbock, TX 79423

Contact

Phone: 806/762-8061 Fax: 806/762-8551 Contact: Kathleen Stocco, Executive Director

• Matagorda County Community Foundation

Address

P.O. Box 2005 Bay City, TX 77404-2005

Contact

Phone: 409/245-6812

Chapter 6

46

Address

1400 Woodloch Forest Dr. Suite 300 Spring, TX 77380-1197

Contact

Phone: 936/890-4882 Fax: 936/890-4882 Contact: Shannon Kidd JD, Executive Director

• New East Texas Foundation

Address

10614 Cr 214 Tyler, TX 75707

• {;;onmmnity li'oundation of North Texas

Address

306 W. Seventh Street, Suite 850 Fort Worth, TX 76102

Contact

Phone: 817/877-0702 Fax: 817/877-1215 Contact: Nancy E. Jones, President E-Mail: [email protected]

Address

200 N. Loraine Suite 500 Midland, TX 79701

Contact

Phone: 432/682-4704 Fax: 432/617-0151 Contact: Guy McCrary, President & CEO E-Mail: [email protected]

• Regional Community Foundation

Chapter 6

47

Address

804 Medical Circle Drive Suite F Longview, TX 75605

Contact

Phone: 903/232-3863 Fax: 903/236-4787 Contact: Susan B. Ellison, Executive Director

• Rio Grande Valley Community Foundation

Address

1200 Ash Street, P.O. Box 790 McAllen, TX 78505-0790

Contact

Phone: 956/682-2871 Fax: 956/682-2917 Contact: Steve Ahlenius, CEO

Address

206 East Main Round Rock, TX 78664

Contact

Phone: 512/514-0046 Fax: 512/519-2015 Contact: Kamali Barron

Address

2201 Sherwood Way Suite 205 San Angelo, TX 76901-3057

Contact


48

Phone: 325/947-7071 Fax: 325/947-7322 Contact: Matt Lewis, President/CEO

Address

110 Broadway Suite 230 San Antonio, TX 78205-1948

Contact

Phone: 210/225-2243 Fax: 210/225-1980 Contact: Dennis E. Noll, President/CEO E-Mail: [email protected]

• Texas An~a Fund Foundation, Inc.

Address

P.O. Box 283 Palestine, TX 75802

Contact

Phone: 903/729-5350 Fax: 903/729-3343 Contact: Bonnie Woolverton, Executive Director

• The Community F'mmdation of the Texas Hill Country. Inc.

Address

P.O. Box 291354 Kerrville, TX 78029-1354

Contact

Phone: 830/896-8811 Fax: 830/792-5956 Contact: Mr. Paul DUrban, Executive Director E-Mail: paul @communityfoundatipn.net

• Texas Valley Communities Foundation

Address

P.O. Box 3988 Edinburg, TX 78540

Chapter 6

49

Contact

Phone: 956/369-9513 Fax: 8581712-1961 Contact: Maria R. Mann, Executive Director

Ill ~A'nO~A~. I • Communities Foundation of Texas !f4'1Mt~·

Address

Mabel Peters Caruth Center 5500 Caruth Haven Lane Dallas, TX 75225-8146

Contact

Phone: 2141750-4222 Fax: 2141750-4210 Contact: Brent Christopher, President and CEO E-Mail: bchdstophcJ'@cftcxas.org

Address

1105 Wooded Acres Dr Ste. 701 Waco, TX 76710

Contact

Phone: 2541754-3404 Fax: 254/753-2887 Contact: Ashley Allison , Executive Director E-Mail: a,allison(i)?wacofonndation.org

• Wharton County Community Il'oundation

Address

102 N. Washington El Campo, TX 77437-4431

Contact

Phone: 979/543-2709 Fax: 979/543-9030 Contact: Gordon Sorrel, President

Chapter 6

50

Cancel

Address

807 Eighth Street, Ste. 750 Wichita Falls, TX 76301-3319

Contact

Phone: 940/766-0829 Fax: 940/766-2861 Contact: Ms. Teresa Pontius Caves, President E-Mail: [email protected]

Chapter 6

51

EXHIBIT D

PRIVATE FOUNDATIONS vs

DONOR-ADVISED FUNDS


52

Start-Up Cost

Recommended Size Charitable Deductions-cash gifts and appreciated stock

Charitable Deductionsappreciated real property

Donor Control

Disclosure

Self-Dealing Rules

Pay~Out

Requirements

Administrative Concerns (personnel, facility, gift and grant mana ement

Annual costs

Annual Taxes

Established at the Austin Community Foundation (ACF Shares the public charity status of ACF

No cost to donor

$5,000 or more

Tax deduction of up to 50% of adjusted income. Stock is deductible at its fair market value as of the date it is received by ACF

Tax deduction available for full market value. Tax deduction available up to 30% of adjusted gross income

Donor makes grant recommendations-to protect tax deductibility, final oversi ht rests with ACF No required public disclosure;

Private foundation self-dealing rules do not apply

Do not apply

provided by ACF

Depends on type of fund established: Endowment fund pays 1/2 of 1% of the fair market value of the fund each year; Pass-throu h Funds a no

None

Non-profit corporation or trust organized as a rivate foundation

t apply for tax-exempt status ·from the

Similar to corporate start-up requiring substantial legal, accounting and o erational start~ costs

Tax deduction is limited to 30% of adjusted gross income

Tax deduction may be taken for fair market value of marketable securities. deduction for other property is limited to the lower of cost or fair market value and is limited to 20% of income. Donor retains complete control over investments and grant-making, subject to I re uirements Annual tax returns and filings must be

Strict regulations prohibit most transactions between a private foundation and donors (including related or cor orations Must pay out for charitable purposes least 5% of its value regardless of its annual income

Must establish and/or obtain these services

Administration can be costly

Generally exempt from income tax is but subject to excise tax of up to 2% of net investment gain including net capital gains


53

Annual Tax Filings and Returns

Not required (included as part of ACF's Generally exempt from income tax is but annual reporting) subject to excise tax of up to 2% of net

investment ain includin net ca ital ains Fund assets are professionally invested through ACF as part of more than $75 Must be filed by the private foundation with

r .. _ .. ___ .. _,_. __ million in funds required supporting schedules Investments

Liability & Risk Insurance

Provided by ACF

Courtesy of www.AustinCommunityFoundation.org


54

EXHIBIT E

ENDOWMENT FORMS


55

THE MIDDLE SCHOOL ENDOWMENT FUND OF THE AUSTIN COMMUNITY FOUNDATION


The Board of the Middle School Parent Teacher Association ("the PTA") donated the property described on Exhibit A to The Austin Community Foundation for the Capital Area ("the Foundation") on , 2012. That contribution is to be held by the Foundation as a Donor Advised Fund and distributed by it subject to the terms of this Agreement.

N arne. The name of the Fund is "The Middle School Endowment Fund" ("the Fund"). The Fund is created by the Board of the PTA pursuant to a resolution of the Board.

Purpose. The Fund's purpose is to make grants from the Fund to or for the purposes of the PTA. Those grants shall be made on the written advice of the Advisory Committee and the grant funds shall be delivered to the President of the PTA for distribution. Grants shall be made for academic and extracurricular activities enrichment at Middle School and to generally improve the school.

Advisory Committee. The Fund shall have an Advisory Committee to advise the Foundation on grants from the Fund. The Advisory Committee shall consist of the President, the President elect, and the Treasurer of the PTA, and the Principal of Middle School. The PTA may designate a successor Advisory Committee by a formally adopted resolution of the Board of the PTA.

Endowment. The Fund shall be a permanent endowment of the Foundation. The Foundation may distribute any amount up to five percent (5%) of the value ofthe Fund in any calendar year ("the distributable amount"). The value of the fund determined for the purpose of establishing the distributable amount shall be determined on the same date each year, unless the governing body of the Foundation determines that it is in the Fund's best interest to change the date. The Advisory Committee may elect to recommend that grants be made of less than the distributable amount and the excess grant money be held for distribution in subsequent years. In any calendar year any amount or all of the Fund's distributable amount from previous calendar years that is undistributed may be distributed for the Fund's purposes.

Other Terms. The Board of the PTA understands and agrees that the property the Board has donated to the Foundation and the income from it will be held in the Fund and used subject to the following conditions:

a. All designated beneficiaries must either be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("the Code"), or constitute a governmental unit referred to in Section 170( c )(1) of the Code. With respect to any distributions from the

-1-


56

Fund which are to be made for a designated purpose, that purpose must be within the scope of the tax exempt purposes of the Foundation.

b. Funds may be commingled by the Foundation's Fiscal Trustees with other similar funds for investing and accounting.

c. At some time in the future the Foundation's Board of Governors may determine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this Agreement is unnecessary, impractical, or impossible, or that the Agreement is not consistent with the tax exempt purposes of the Foundation. In that case, the Foundation's Board of Governors may order any variance from the Agreement and application of the whole or·any part of the principal or income of the Fund to other charitable or educational purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as feasible, the intents and purposes of this Agreement.

d. Determination of what constitutes "income" for purposes of distribution shall be reasonably determined by the Foundation and/or the Treasury Department's Internal Revenue Service Regulations.

e. The Foundation's acceptance of this Agreement, so far as permitted by law, shall constitute its agreement to hold, manage, and distribute the donation as set out above.

f. Provisions of the Foundation's Articles of Incorporation as on file in the office of the Secretary of State, along with the Foundation's Bylaws, as amended, shall be followed in carrying out this Agreement.

g. The Board members of the PTA acknowledge that they have been furnished with the written guidelines of the Foundation relative to "Donor Advised Funds" and they agree that the guidelines will be followed with respect to the Fund.

Executed to be effective _______ , 2012.

--------, President _______ ,, 2012

-2-


57

-3-

_________ ,, Secretary ________ , 2012

----------, Treasurer _______ :, 2012

Austin Community Foundation for the Capital Area

by: --------------

-------' 2012


58

EXHIBIT A

THE MIDDLE SCHOOL ENDOWMENT FUND OF THE AUSTIN COMMUNITY FOUNDATION


Dated _____ :, 2012

A check in the amount of$ ----

-4-


59

I"" I

A .I

I

THE XYZ MEMORIAL LIBRARY ENDOWMENT FUND OF THE AUSTIN COMMUJ\TITY FOUNDATION


____ _, of Austin, Texas, donated the property described on Exhibit A to The Austin Community Foundation for the Capital Area ("the Foundation") on 2009. That contribution is to be held by the Foundation as a Donor Advised Fund and distributed by it subject to the terms of this Agreement.

~· The name of the Fund is "The XYZ Memorial Library Endowment Ftmd"("the Fund"). The Fund is created by

Purpose. The Fund's purpose is to make grants from the Fund to or for the purposes of The XYZ Memorial Library ("the Library") in , Texas. Those grants shall be made on the written advice of the Advisory Connnittee. Gta11ts shall be made for any and all of the purposes of The 1..'YZ Memorial Library and to generally improve the Library and its grounds, includi11g the operation of the library.

Advisorv Committee. The Fund shall have an Advisory Committee to advis(\1": tlie',. · Foundation on grants from the Fund. The Advisory Committee shall consist of , _____ , and . The Advisory Connnittee may ·designate a successor Advisory Committee by written agreement and it may adopt Bylaws for its operation.

Endowment. The Fund shall be a pennanent endowment of the Foundation. The Foundation may distribute any amount up to five percent (5%) of the value of the Fund in any calendm· year ("the distributable rutwunt"). The value of the :fund determined fot the purpose of establishing the distributable amount shall be determined on the same date each yeru-, unless the goveming bod)r' of the Foundation detennines that it is i11 the Fund'·s best mterest to chru1ge the date. TI1e Advisoq Committee m.ay elect to reco:mmend that grants be-made ofless than the distributable mnount and the excess grant money be held for distribution in subsequent yeru·s. In any calendar year any amount or all of the Fund's distributable amount from previous calendar years that is undistributed may be distt.ibuted for the Fund's purposes.

Other Terms. The Committee understm1ds and agrees that the property the Committee has donated to the Foundation, all donations m the future, rutd the mcome from it will be held m the Fund and used subject to the following conditions: ·

a. All designated beneficiaries must either be exempt :from federal i11come taxes under Section 501 ( c )(3) of the Intemal Revenue Code. of 1986, as run ended ("the· Code"\ or constitute ·a govemmental unit refe11·ed to in Section 170(c)(l) ofthe Code. With respect to any distributions fi·om the Fund which m·e to be made fdr a designated purpose, tha:t purpose must be within the scope of the tax exempt purposes of the Foundation.

'-----···--·


60

•- • --· '~-····~-.,-,,--~•• ••--• •• ,,.._ ____ ,..,,.,~-••On•- •·~•-••••---••·•• 0 0000-0o> > •• o>o• 0 0 ---• .,,..,,~, .... >"'~"'

b. Funds may bE;) con:un:ingled by the Foundation's Fiscal Trustees with other similar funds for investing and accounting.

c. At some tin1.e in the future the Foundation's Board of Govemors may determine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this Agreement is unnecessary, impractical, or impossible, or that the Agreement is not consistent with the tax exempt p'Ltrposes of the Foundation. In that case, the Foundation's Board of Governors may order any varianc~ from the Agreement and application of the whole or any part of the prhlcipal or income of the Fund to other cha:titable or educational purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as feasible, the intents and purposes of this Agreement.

d. Deternl:i.nation of what constitutes "income" for purposes of dist:tibution shall be reasonably detennined by the Foundati~n and/or the Treasury pepartment's h1ternal Revenue Service Regulations ..

e. The Foundation's acceptance of this Agreement, so far as pennitted by:.la:w;. shall constitute its agreement to hold, manage, and distribute the donation as, set out above.

f. Provisions of the Foundation's Articles of Jnco:rporation as on file in the office of the Secretary of State, along with the Foundation's Bylaws, as amended, shall be followed in carrying out this Agreement.

g. The Committee acknowledges that it has been :fpmished with the written guidelines of the Foundation relative to "Donor Advised Funds" and it agrees that the guidelines will be followed with respect to :the Fund.


_____ ,2009

2

Austin Community Fo"Lmdation for the Capital Area

by:--------Kenneth L. Gladish, Ph.D., President ______ ,,2009

-----·-'-----------·-----------··


61

I '

-0 ----··- _, ...... ,, __ oOO ~ ... _ ....... ,,, ........ ·-·' -- .. -·--·---;---· 00- ........ 0000 oo '·--·- --- ,., ......... ,,_N00--0 --· ~~~-·-----·-· __,..,_ ... ......__,,, '~

EXHIBIT A

THE XYZ MEMORIAL LIBRARY ENDO'iVMENT FUND OF THE AUSTIN COMMUNITY FOUNDATION

.FOR THE CAPITAL AREA

Dated _____ , 2009

A check in the amount of$ ___ _

·----~---··-------... - ........... --................. _,, ___ :, .. - ...................... ___ ,

. -~-.. ~-·-~~ ·------------·--------·----·------


62

Revised 4/2005 Sample Language for an Endowment Donation Instrument: Ple(lge

I!We, (donor namefs]) , hereby acknowledge a gift commitment to the Board of Regents of The University of Texas System for the benefit of The University of Texas at Austin. I intend to provide a total of $ to be conveyed in installments of $ per year beginning on_ , 20 __ or 'sooner, and continuing through

------' 20_.

Said funds shall be used to create the (endowment name) as a permanent endowment for benefit of the (college/school/unit) . Funds distributed from the endowment shall be used to (statement of use)

. This endowment may be merged or commingled with other funds held by the Board of Regents ofThe University of Texas System for investment purposes, in accordance with the

. policies of the Board ofRegents. Funds distributed from the endowment m a year may be retained and expended for the purposes of the endowment in subsequent years and a portion may be designated, at the discretion of the Board or The University of Texas at Austin, as a · permanent addition to the principal of the endowment. ·

In the event I am 111,1able to fulfill this pledge by the date specified above, the Board of Regents may redesignate the endowment to the highest posstbl.e classification based on the , fundfug level1·eached and followh~g the same general purpose specified below. If the funding level reached is insufficient' for retention as an endowment, the endowment may be dissolved .and the funds may be expended for the general purpose specified above .

. Such endowment shall never become a part of the Permanent University Fund; the Available University Fund, or the General Ftmd of the State of Texas, and shall never be subject to appropriation by the legislature of the State of Texas. All future additions to the endowment, made by any party, including the Board of Regents or The University of Texas at Austin, shall be subject to the provisions of this donation instrument and shall be considered permanent endowment funds. If in the opinion of the Board of Regents ofThe University of Texas System, future circumstances change so that the purposes for which the endowment is established become illegal, impracticable, or no longer able to be carried out to me·et'the needs of· The University of Texas at Austin, said Board may designate an altemative use for the endowment payout to further the objective of the University, in the spirit of my/our original purpose.

Signature Date

Address

City, State, Zip Code

(Optional) Richard B. Bason Date Vice President for Development

Endowments are officially established upon the approval of the Board ofRegents. As with any decision involving your assets, · we urge you to seek the advice of your professional counsel when considering a gift to The University of Texas at Austin.


63

- ··-····--•·---•-·••'••'••--••• ,_,,_,, ......... , •. ,,_ •. ·-• • _,_ ·-•-•--""'"•-----~-·-· • • -·--•-·--• -··-----···---···.-~~-·--··---· _,,~ _,._,,, ·----------·-• -··-·-··-~- ~--·~"-' •••--·- ~ -~--·-• ·~"M'"'''''"'" •

Revised 4/2005 Sample Language for an EndQWIQ.el).t :Oomitiop. Instrument: Pledge with Corporate Matching

I/We, (donor name[sJ) , hereby acknowledge a gift commitment to the Board of Regents of The University of Texas System for the benefit of The University of Te:x.as at Austin. I/We intend to provide a total of $ to be conveyed in installments of $ per year beginning on , 20 __ or sooner, and continuing through , 20_. IIW e ask that any funds contributed by a corporate matching program as a result of my/ our personal gifts, be considered towards the funding goal.

Said funds shall be used to create the (endowment name) as a permanent endowment for benefit of the (college, school, unit). Funds distributed from the endowment shall be used to _,_,(s'"""'ta""'t,em=en""'t--"o"'"f"""us""e:.~-) ______ _,

This endowment may be merged or commingled with other funds held by the Board of Regents of The University of Texas System for investment purposes, hi accordanc~ with the policies of the Board of Regents. Funds distributed from the endowment in. a year may be retained and expended for the purposes of the endowment in subsequent years and a portion may be designated, at the discretion of the Board or The University of Texas at Austin, as a pennaneri.t additi?n to. the ~rincipal of the endowment.

In the event I am/we are unable to fulfill this pledge by the date specified above, the Board of Regents may redesignate the endowment to the highest possible classification based· on the funding level reached, and following the same general Pl!rpose specified below. If the funding level reached is insufficient for retention as an endowment, the endowment may be dissolved and the funds may be expended for the general purpose specified above.

Such endowment shall never become a part of the Permanent University Fund, the Available University Fund, or the General Fund of the State of Texas, and shall never be subject to appropriation by the legislature of the State of Texas. All future additions to the endowment, made by any party, including the Board of Regents or The University of Texas at Austin, shall'be subject to the provisions of this donation instrument and shall be considered permanent

·endowment funds. !fin the opinion of the Board of Regents of The University of Texas System, future circumstances change so that the purposes for which the endowment is established become illegal, impracticable, or no longer able to be carried out to meet the needs of The University of Texas at Austin, said Board may designate an alternative use for the endowment payout to further the objective ofthe University, in the spirit of my/our original purpose.

Signature Date

·Address


(Optional) Richard B. Bason Date Vice President for Development .

Endowments are officially established upon the approval of the Board of Regents. As with any decision involving your assets, we urge yo~ to seek the advice of your professional counsel when considering a gift to The University of Texas at Austin.


64

Revised 4/2005 Sample Language for an Endowment Donation Instrument: Memorial/Honorific F'undraising

I/We, (donor name[s]) · , hereby give (amount or description) , to the Board ofRegents ofThe University of Texas System for the use and benefit of The University of Texas at Austin. I/W e request that my/ our gift be combined with others received by the University in

(memory/honorL_ of (name ofhonoree), for a total of$ ___ _

Altenzative first paragraph for gift with pledge/ , I/We, (donor name[sJ) , hereby acknowledge a gift commitment to the Board of

Regents of The University of Texas System for the benefit of The University of Texas at Austin. I/We intend to provide a total of $ to be conveyed in installments of$ _ per year beginning on , 20_ or sooner, and continuing through , 20_. I/We request that my/our gift be combined with others received by the University in

(memozy!honor) of . (name ofhonoree[s]) , for a total of$ ____ _

Said funds shall be ·used to create the (endowment name) as a permanent endowment for benefit of the (college/school/unit) . Funds distributed from the endowment shall be used to (statement of use)

These endowment funds may be merged or commingled with other ftmds held by the . Board of Regents of The University ofTexas System for investment purposes, in accordance with the policies of the Board of Regents. Funds distributed from the endowment in a year may be retained and expended for the purposes of the endowment in subsequent years and a portion may be designated, at the discretion of the Board or The University of Texas at Austin, as a permanent addition to the principal of the endowment.

Such endowment shall never become a part of the Permanent University Fund, the Available University Fund or the General Fund of the State of Texas, and shall never be subject to appropriation by the legislature of the State of Texas. All future additions to the endowmentj made by any partyj including the Board of Regents or The University of Texas at Austin, shall be subject to the provisions of this donation mstrument and shall be considered permanent endowment funds. If in the OJ?.inion of the Board of Regents of The University of Texas System, future circumstances change so that the purposes for which the endowment is established become illegal, impracticable, or no longer able to be carried out to meet the needs of The University of Texas at Austin, said Board may designate an altemative use for the endowment payout to further the objective of the University, in the spirit of my/our original purpose.

Signature Date

Address


(Optional) Richard B. Eason Date Vice President'for Development

Endowments are officially established upon the approval of the Board of Regents. As with any decision involving your assets, we urge you to seek the advice of your professional counsel when considering a gift to The University of Texas at Austin.

[_, __ e-·-~-----·••"••••-·-··----··~--"""-"-"~----------·--••


65

Revised 4/2005 Sample Language for an .Endowment Donation ·. Instr-ument: Full, Outright Gift

VWe, (donor name[sl) , hereby give (amount or description) , to the Board ofRegents of The University of Texas System for the use and benefit of The University of Texas at Austin.

Said funds shall be .used to create the (endowment name) as a pennanent endowment for benefit of the (college/school/unit) . Funds distributed from the endowment shall be u~ed to (statement of use)

These endowment funds may be merged or commingled with other funds held by the Board ofRegents of The University of Texas System for investment purposes, in accordance

·with the policies of the Board of Regents. Funds distributed from the endowment in a year may be retained and expended for the punposes of the endowment in subsequent years and a portion may be designated, at the discretion of the Board or The University of Texas at Austin, as a permanent addition to the principal of the endowment. ·

Such endowment shall never become a part of the Permanent University Fund, the Available University Fund or the General Fund of the State of Texas, and shall never be subject to.approprj.ation by the legislature of the State of Texas . .f.-11 future additio~s to-the endoWi,nent,. made by any'party, including the Board of Regents or The University of Texas at Austin, shall be subject to the provisions cfthis donation instrument and shall be considered permanent endowment funds. If in the opinion of the Board of Regents ofThe University of Texas System, future circumstances change so that the purposes for which the endowment is established become illegal, impracticable, or no longer able to be carried out to meet the needs of The University of Texas at Austin, said Board may designate an alternative use for the endowment payout to further the objective of the University, in the spirit of my/our original purpose.

·Signature Date

Address


(Optional) Richard B. Eason . Date Vice President for Development

Endowments are officially established upon the approval of the Board of Regents. As with any decision involving your assets, we urge you to seek the advice of your professional counsel when considering a gift to The University of Texas at Austin.


66

- . TEE AUSTIN IDGH SCHOOL ;ENDOWMENT FUND OF


The Board of the Stephen F. Austin High School Parent Teacher Student Association . ("the PTSN') donated the property desc#bed on Exhibit A to The Austin Community Foundation for the Capital .Area ("the Foundation11) on , 1999. That contribution is to be held by the Foundation as a Donor Advised Fund and distributed by it subject to the terms of this Agreement.

Name, The name of the Fund is "11 The Austin High School Endowment Fund" (11 the Fund11

). The Fund is created by the Board of the PTSA pursuant to a resolution of the Board.

Purpose. The Fund's purpose is to make grants from the income of the Fund to .or for the purposes of the PTSA. Those grants shall· be made on the written advice of the Advisory Committee and the grant funds shall be delivered to the Chairman of the Excellence Fund Committee of the PTSA for distribution. Grants shall be made for academic and extracurricular activities enrichment at Stephen F. Austin High School and to generally improve the school:

Advisory Committee. The coinmittee of the PTSA that administers the Excellence Fund of the PTSA (or the successor to the Excellence F)lnd) shall serve as the Advisory Conunittee of the Fund to advise the Foundation on grants. However, the PTSA may designate a successor Advisory Committee by a formally adopted resolution of the Board Of the PTSA.

. Income. No principal of the Fund may ever be distributed and any amount of the income of the Furid may be added to the principal of the Fund each year. In any calendar year any amoU:nt or all of the Fund's income earned in previous calendar years may be distributed for the Fund's pUrposes. The Advisory Committee may elect to recommend that grants be made of less than the income available for grants in any calendar year and the excess grant money be held

· for distribution in subsequent years.

Other Terms. The Board of the PTSA understands and agrees that the property the Board has dona~ed to the Foundation and the income from it will be held in the Fund and· used subject to the following conditions:

a. All designated beneficiaries must either be exempt fmm federal income taxes under Section ?Ol(c)(3) of the Internal Revenue Code of 1986, as

. ame:q.ded ("the Code"), or constitute a govenunental unit referred to in Section 170(c)(l) of the CQde. With respect to any distributions from the Fund which are to be made for a designated purpose, that purpose must be within the .scope of the tax exempt purposes of the Foundation.

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67

b.

c.

d.

e.

f.

g.

Funds may be cmmningled by the Foundation's Fiscal Trustees with other simil(l! funds for investing and accounting.

At some time in the future the Foundation's Board of Governors may dete1)11ine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this Agreement is unnecessary, impr?tctical, or impossible, or that the Agreement is not consistent with the tax exempt purposes of the Foundation. In that case, the Foundation's Board of Governors may order any variance from the Agreement and that application of the whole or any part of the principal or income of the Fund to other charitable or educational,purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as· feasible, the intents and putposes of this Agreement.

Detennination of what constitutes "income" for purposes of distribution shall be. reasonably determined by the Foundation· and/or the Treasury Department's Internal Revenue Service Regulations.

The Foundation's acceptance of this Agreement, so far as permitted by. law, shall constitute its agreement to hold, manage, and distribute the donation as set out above.

Provisions of the Foundation's Articles of Incorporation as on file in the office of the Secretary of State, 'along with the Foundation's Bylaws, as amended, shall be followed in carrying out this Agreement.

The Board members ·of the PTSA aclmowledge that they have been furnished with the written guidelines of the Foundation relative to "Donor Advised Funds" and they agree that the guidelines will be followed with respect to the Fund. ·

Executed to be effective ______ , 1999.

G:ICSS\SBMINAR\Docs for Adv. Course,doc

----------~-~---------

____ ,President ________ , 1999

_____ ,Secretary ______ , 1999


68

0:\CSS\SEMINA:R\Docs for Adv. Course.doo -9-

---··---·---·----···--·---···------~-~~---·----


by: ___________ _

_______ , 1999

--- ··--------------·----


69

EXHIBIT A

THE AUSTIN IDGH SCHOOL ENDOWMENT FUND OF THE AUSTIN COMMUNITY FOUNDATION


Dated __ ~--' 1999

A check in the amount of $1 00.00.

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70

EXHIBIT F

OVERSEAS GRANT-MAKING FORM


71

[INSERT]

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CONSTITUTION OF XYZ

. ARTICLE SIX GJU.NTS FROM THE INSTITUTIONS OUTSIDE O;F [COUNTRY], INCLUDING THE AUSTIN COMMUNITY FODNDAT!ON ("ACF")

6.1 PUBLIC SUPPORT SCHEDULE: The XYZ shall. ensure t11at at least '33.3% of its total support comes :D:om public sources. In order to ensure satisfaction of the "pu.blic support test" under U.S. law~ the XYZ shall develop and maintain a Public Support Schedule each year, which divides the XYZ's sources of revenues into six (6) categories: ·

1. Gifts, Grant.s, Contributions: . a. Voluntary payments or donations to XYZ for which no

material product or services are given to t11e contributor, although services might be provided to others (such as the general public); · ·

b. Gifts other than cash (e.g. free rent, equipment, materials,. supplies) at the fair market value at the time the items 'v.rerfilt donated ·

c. Examples of gifts, grants, and contributions: i. Grants from ACF, which is located at' 431 S Guadelupe,

Suite 300, Austin Texas 78751; ii. Contributions from a corpo1·ation or an i11clividual;

iii.· Cash grant from the. govermnent to support XYZ's general pmposes or to support a specific program or research project; · ·

iv. Lottery money, whether or not from the government; v. Revenue from taxes levied by the goverinnent on behalf

ofXYZ; d. Not included gifts, grants, and contributions:

i. Non-cash gifts from a govemmental agency ii. Value of volunteer services

2. Membership .Fees: If; for the purposes of general support, XYZ .ever charges menibership dues or accepts a donation of some kind fonn its members; those membership dues should b<:i reported in 'this category. If members receiye somet11ing of value or receive a material or substantial benefit, that amount should be ~ubtracted from the amount · .r~ported as memb'ership fees. For example, if XYZ charges me111bers per year and only provides a periodic newsletter, the entire would be considered dues. If a guide to membership services worth · is provided, then only · would be considered memb~rship dues.

3. Program Service Revenue related to your cha:r~table pu!J?ose; s?-ch as:

1

-----~---·----.. ------·----·-·-~----------

i :I

i :I ~i ~

I l


72

a. All payments received from admissions to events such as conferences, seminars, and workshops;

b .. Merchandise sold by A.'YZ relating to its charitable purpose; c. A portion of membership dues. If, for theb: --~-

membership payment, members .received a guide to XYZ services worth , this amount would be program sendee revenue.

d. Fee for services related to XYZ's charitablepuipose. e. Fee for services perfonned for a governmental agency for the

direct benefit of the governmental agency and not the public. f. Rental income, if it relates to XYZ' s charitable purpose. g. Interest from a revolving loan fund operated by J,.'YZ as part of

its charitable purpose. 4. Jntetest, Dividends, Rents, and Royalties: Interest income and rental

income that are related to XYZ's charitable purpose belong in the third category above. The fourth category includes any interest, dividends, rents, and royalties that are not directly related to your charitable purpose. For example, if XYZ has a bank accoUJlt tl:J,at earns interest

· income, that income should be recorded here. (Note: A capital gain or·. loss that XYZ has when it sells investments or other capital assets~~ . should not be included on the Public Support Scb,edule at all.)

5. Income Unrelated to Charitable Purpose: Includes all net 1ncome from business activities that XYZ regularly perfonns that are not related to its chatitable activities. Net income is total income minus the expense ofproduch1g that income. For example, ifXYZ operated a bookstore whose operations were not considered part of its charitable purpose, the net income would be included here. Money made on currency exchange gain would also be considered mtrelated income.

6. Governmental Services and Facilities: Include the ·fair market value on the date XYZ received services or facilities :S:ee of charge from the 1.

government or a governmental agency. Do not in_clude services or .. facilities if they are also available at no charge to the general public.

At the end of each year, XYZ shall· deliver a copy of its public suppmt schedule to all donor institutions outside of [ coUJltry], including ACF.

6.2 PURPOSE OF GRANT FUNDS FROM INSTITUTIONS OUTSIDE OF [country], INCLUDING ACF: A11y grant funds from institutiohs outside of [country], .including ACF, and lllCOlne eamed on those funds, may be spent m11y for charitable; religious,. scientific, literary or educational pmposes in accordance with United States law and in accordance with the budget provided by the relevant institution. No substantial changes will be made from the approved fund budget without the institution's prior approval in writing.

6.3 SEPARATE FUND: All grant fu11ds received by XYZ from institutions outside of [com1,try], including ACF, shall be maintained il1 a separate fund dedicated to

2

----·-~··--.. --


73

the· charitable purposes specified. The separate fi.md may be either 1) a physically separate bank account restricted to the described cha:dtable purposes, or 2) a separate bookkeeping aocom1t (limited to the specified charitable pm-poses) maintained as part of XYZ's financial records.

6.4 REPORTING: XYZ shall furnish a written report signed by an appropriate office to all donor institutions outside of [com1try], including ACF, within three (3) months after the close of each fiscal year in which XYZ receives or spends any portion of XYZ grant funds (including income, if any :from those funds) until the grant funds are spent in full or the grant is otherwise tenninated. According to infonnation provided by 1..'YZ, XYZ' s fiscal year ends March 31st. The report for each fiscal year is due no later than June 30th. In addition, within three (3) mouths following the fiscal year~ end in which XYZ completes its use of the grru.1t' funds, a final written report is to by furnished to all donor institutions outside of [country], including ACF, with respect to all expenditures under the grant (including salaries, travel, a11d supplies).

Bach written report, including the final wntten report, must GOntain two parts: a narrative account and ·a financial account of what was accomplished by the expenditure '. of the grant funds during the period covered by the report. ·

A. Narrative Account: The narrative account should provide a detailed description of what was accomplished by the grant, including a description of the progress made toward achieving the goals of the grant and an assurance that the. activities under the grant have been conducted in confonnity with the terms· of the grant.

B. Financial Account: The financial account should provide· a financial statement reporting, in U.S. dollars, all expenditures. of Foundation grant funds a11d any income. earned on those :fultds .. The financial statement should include only Foundation funds received ru.td expended m1der this grant during the period covered by. the report. It is assumed that the financial statement will be prepared :from books and records maintained on a :ful1d~accounting (cash) basis. Only expenditures made in support of the grant pm-poses should be charged against the gr~nt, and records should be maintained of those expenditures adequate to enable the use of such nmds to be checked readily.

6.5 RECo'RD lVI.AINTENANCE AND INSPECTION: XYZ shall maintain the records of receipts and expenditures a11d make its books and records available to any donor institutions outside of [country], including ACF, for inspection at reasonable times. The donor institutions outside of [countiy], includh'l.g ACF, may monitor and conduct an evaluation of operations under this grant, which may include a visit by pers01mel to observe 1..'YZ's program, a discussion of tl1e progrru.n with XYZ, and a review of fu1ru.1cial 'and other records and materials co1mected with the activities financed by the grant.

3

I Charitable Planning For Clients Who Aren’t Wealthy: Ideas and Forms You Can Take Back to Your Office and Use Tomorrow Chapter 6

74

6.6 PROHIBITED ACTIVITIES: In order to comply with the tax laws of the United States, grant ftmds from institutions outside of [co~mtry], including ACF, shall not be used for any of the following purposes:

A. To carry on propaganda, or otherwise to attempt to influence any legislation (within the meaning of Section 4945(d)(1) of the United States Internal Revenue Code);

· B. To influence the outcome of any specific public election or to carry on, directly or i.J.J.directly, any voter registration drive (withill the meaning of Section 4945(d)(2) of the United States Internal Revenue Code); ,

. C. To malce grants to individuals for travel, stu.dy, or other similar purposes by such individuals (such as scholarships, fellowships or grants for research), unless such grants satisfy the requirements of Section 4945(g) of the United States Internal Revenue Code; or ·

D. To .. undertake any activity for any purpose other than the charitable purposes specified in Section 170(c)(2)(B) ofthe United States IntenJ.al Revenue Code.

6.7 RETURN OF UNDSED FUNDS: Any grant funds and any income ea:med on those funds that are not spent or conunitted· for the purposes o(the grant .shall be returned to the donor institution outside of [country], mcludi.J.1g ACF.

Signatures

4

.... --·--------- ------- ,,.,,,~, •-w•-•• ----·- .,....,, -••- •••-'-'•• ·- .,_, __ , ______ ,_._.:....__ -·- w •••"--• ·---• -•-"•- ---· ,_,..,.,..,._,._,........., ,_, __ M


75

EXHIBIT G

EXPENDITURE RESPONSIBILITY AND EQUIVALENCY


76

Ms. Helen Todd Managing Director, Moris Rasik c/o Alv.fFITIL . Room 21 Carla Mansions Geremias, Motael, Farol Dili, East Timor

Dear :Helen:

July 20, 2006

It is our great pleasure to deliver a grant for $60,000US from the Silverton Foundation ("Silverton") to Moris Rasik ("Grantee"). These funds constitute a grant of (1) $50,000 to be used as "on-lending funds" for Grantee's new small business loan and payroll products, and (2) $10,000 to be used in support of further development of accounting, software, and fmancial control systems to manage related increased new lending activities, each as more particularly described in Grantee's PropOS!il to Silverton Foundation dated April 25, 2006 and attached to and made a part of this letter as Schedule 1 ("Program").

We understand that Grantee will utilize the grant's proceeds only for charitable and educational activities consistent with the operation of the Program. In coimection with the utilization of the grantproceyds. for the operation of the Program, we also understand that Grantee agrees to. comply with the experrdit\u:.e · responsibility grant provisions attached to and made a part of this letter as Schedule 2.

We further understand that Grantee may identify Silverton as a source of funding for the Program in various conununications, publications and media to staff, supporters and the public, and Grantee may use Silverton's name and logo for sucP, purposes. We Jequest that, to the extent it is ·reasonably practical and appropriate to do so, Grantee provide Silverton with copies of such communications. We also request that any listing of contributors list the grant as having been made by the Silverton Foundation.

We also understand that .Grantee is an organization that is a "civil society organization" ("NGO") · registered with the East Timorese NGO Fot'Ul'll., which status has been confinned by a letter of registration, copies of which Gtantee will provided to Silverton. We also understand that Grantee. accepts and will discharge full control of tl~e grant funds and its disposition consistent with its NGO status and with the terms of this grant letter. Please acknowledge your agreement with the terms of this grant letter by signing the ackn9wledgment on the enolos~d copy and returning it to me for our records.

We \lfe pleased for the opportunity to s:uppot't the important work of Moris Rasik in East Timor.

Accepted and agreed to as of , 2006 Moris Rasik

Sincerely, Silverton Fmmdation, Inc.

By:-~-:-----=--=-::-=---:--:::::-:--~ Anch·ew S. 'White, Executive Director

By:~~~~77~~~~-------Helen Todd, Managing Director

--- ... ~-·· ·- - H~o• •• ,_ .. _ ··- -·-·-··-•oo•••"-'~0 .... -~ ..... _,...,.,....,,._,_ ONoooooo•O•O-OMO ... _____ ., .... ·--- --··------· .. ------;---- .. -·---·


77

------·--·-··-·--·-·····-- ....... -----·-···-····-----------·•-.............. - ........ ._ __________________ , ___ ·----- ______ ... ,, _____ ......... -

Schedule 1 Grant by Silverton Foundation, Inc. to MorisRasik July20, 2006

---·--·-----------


78

Proposal to Silverton Foundation 25 April, 2006

Introduction

Moris Rasik is a micro :finance pro gram, which has been operating in Timor Leste since , November, 2000. Timor Leste is divided h1to 13 districts. Moris Rasik to date has 12 branches in eight of the western and central districts of the country, includi11g the enclave of Oecusse in

. Indonesian West Timor.

Moris Rasik follows a modified version of the Grameen Banlc methodology, with a primary focus on poor, rural women. These women are motivated to form five member groups, given some basic.trairung and then amalgamated into village based centers of between 20 to 40 women. All financial transactions talce place transparently at a weekly center meeting, held in the village and serviced by Moris Rasik field officers:

Moris Rasik is registered as an NGO and governed by a Board of seven individua:Is, five of whom are Timorese. They include the Minister of Labour, the·fust Lady of Timor, an opposition leader in parliament and the Se6retary-Genera1 oftbe Thnorese Red Cross; The foreig:turrem:bers: are Helen Todd tmd an i1westment banker from Singapore.

Moris. Rasik is a national program, but has a tecluncal' assistance agreement with the CASHPOR network, and cu11'ently has tw? fo1·eign management staff.

Moris Rasik is the largest microfinance program in Timor, by client outreach, with an active client base of7, 809 (end-March, 2006). Timor Leste has a population of just under one million, with a poverty rate (based on a poverty lme of 50 cents per day) of 42%. This means that Moris Rasik is already reaching 10% of the poverty households in the country. It works amongst. the poorest of these households, who live in the central' mountains and the remote southern coastal areas.

Timor Leste is a difficult envi1·o1nnent for microfinance, with a small and scattered population, very poor road networks, lack of public services like electricity supply, telecommunications, transport and basic law enforcement. Human'resources are very lacking and all oflv):oris Rasik's 94 staff, until very recently, have been high schoolleaver.s with no work experience, wh01n we have trained from scratch into professional and management positio1-1s. ·

The mral economy of Timor is limited, with most people dependent on subsistence ag:ti.culture and few markets, outside of the capital Dili, to sti1nulate production or value added tradhtg activities.

As. a result, while growth in clients has been satisfactory, growth in portfolio has lagged bel'rind targets, as the capacity of most clients to talce up larger loans has g:t·own more slowly than expected. Tlns has a knock-on effect on g:t·owth to viability. In the face of this slow progress to self-sufficiency, the Moris Rasik Board decided in the last quarter of2005 to extend credit

-------- -~-~-


79

I

services to otb.er sectors of the population tbrough two new loan products -·a small business . loan to entrepreneurs in the district capitals, who are just above the poverty line, and a consumption loan to lower~ level government servants in districts where there are no ·banlcs. Moris Rasik's advantage in these new markets is its established presence in the district capitals and local staff with knowledge of the local market.

Mor.is Rasik Products

Moris Rasik offers a voluntary, open· access savings facility to its group olients.It pays· 6% on these savings.

Moris Rasik offers two tYpes ofloans to its group clients. The basic loan to all clients is an income gener·ating loa11. on a 25 week cycle, payable weekly. The m.ililinum loan is $50 and the maximum $100 on the first cycle. Clients who repay in full can immediately get a repeat loan of double the first cycle and, in subsequent cycles, an amou11t dependent on the result of a busi.11ess assessment by the field staff 1md their amount of savings. Interest rate on this loan is 20% flat. In · · later cycles, clients are given the option of ~xtending the tenn 9fthe loan to 50 weeks, and a. minorliy of niature clie11ts are taldng loans of between $1,000 and $2,QOO under this system.

The second loan product for group clients is the "Special Loan". This is an investment loaar:·.q.f between $1,000 to $5,000, tepaid weekly over 50 or 75. weeks, for investment in machinery,> vehicles, business premise or setting up a new: and additional business activity. So far, 72 clients have taken this ''Special Loan".

The Small Business Loan is from $2,000 to $20,000 to entrepreneurs with existing cash flow and a plan for expansion. It is for both men and women.

The Payroll Loan is for civil servants in the districts far from banks in Dili, to fund home improvement, vehicles, university schooling and small businesses ..

The last two loans were developed in the fixst' quarter and disbursement began.in March, 2006. , They have already added $70,ooq to the loan portfolio.

Funding Needs

The demand for the P ayrollloan is very strong. We have implemented in only one district and have urgent requests to offer tlris facility in other districts. We need to train more staff and codify the procedures developed so far. However, once this is. done, our expansion is limited only by the funds available.

Mo1is Rasik would like to apply to Silverton Foundation for supp01i of$50,000 fol' on~lending funds for the new individual loan products. We would also like to apply for a small grm1t of $20,000 to help support fmiher development of the accounting, software and· financial control systems that we need to successfully manage this potential large increase in our pOlifolio.

Our projected funding sources and unmet needs over the second half of the year are detailed

l~-----~=-~-·----------~-----~---~--=-----~--~~-


80

below. We are also applying to an Indonesian bank and Grameen Foundation USA to supp01t our portfolio expansion. ·

Funding Sources:

Cunent balance HIVOS, Netherlands Development Cooperation Ireland (to group lending under gender program) ILO Stage Program (for Special Loan clients who take their business training)

Funding Needs

Operating Deficit . Asset purchase (motorbikes, computers,· etc.)

Net increase in group lending Net increase in individual lending

Funding Deficit

70,000 144,000

30,000

25,000 269,000

70,000 20,000 140,000 400.000 630,000

361,000

Attached to this re'quest are our Financial Statements and Operational Report for March, 2006. I have also included om· first quarter report to HIVOS, which glves more detail on the achievements of the first quarter. .

Helen Todd . Director.

--··-----·-·-·------·--.. -- .. -· -··


81

Schedule2 · Grant by Silwrton Foundation, Inc. to MorisRasik July 20, 2006

Silverton Foundation, Inc. Expenditure responsibility grant letter provisions

1. &parate fond. All Silverton grant funds received by Grantee must be maintained in a separate fund dedicated to the charitable purposes described in.thls letter. Such a separate fund may be either (1) a physically separate bank account restricted to the described charitable purposes, or (2) a separate bookkeeping account (limited to the described charitable purposes) maintained as part of your finaJ.+cial records. Silverton encourages, whenever feasible, deposit of grant funds in an interest bearing account.

2. Repo;'ting. A wtitten report signed by an appropriate officer of Grantee must be furnished to Silverton quarterly during each fiscal year in:.which GraJ:J.tee'receives or'spends any portion of Silverton grant funds until the grant funds are spent in full or the grru.1t is otherwise terminated. In addition, within two (2) months following the fiscal year end in which Grantee completes its use of all grant funds, a final written report is to be furnished to Silverton with respect to all expenditures under the grant.

Each written report, including the final wtitten report, must contain two parts: a narrative account and a financial account of what was accomplished by the h'Penditure of the grant funds during tliJ.e .. peJ:'i:od covered by the report. We understand and agree that these reports may be the same reports as Gi'aJ,ltee · subnuts to the Dutch NGO Humanist Institute for Cooperation with Developing Countries, or "HIVOS"; in col:meotion with reporting of its activities, such reports to include. an operations report, financial statements for the quarter, a narrative report of major events, and a breakdown of viability by branch.

Should Grantee discontinue its reporting to HrVOS, we desire that reporting continue quarterly; that the narrative account provide a detailed descdption of what was accomplished by the grant, including a description of the progress made toward achieving the goals of the grant and an assurance that the activities under the grant have been conducted in confonnity with the terms of the grant; and. that the financial account should provide a financial statement reporting, in u.s. dollars, of all expenditures of Silverton grant funds and any income earned on those. funds. Only expendltures made in support of the grant purposes should be charged against the grant, ru.1d records should be maintained of such expenditures adequate to enable the use of such ft.mds to be checked readily.

If wtitten reports are not submitted to Silverton on a timely basis, U.S. law requires Silverton to witbhold further payments (if any) to Grantee ru.1d prolllbits Silverton from awru.·ding new grants to Gtantee.

3. Record Maintenance qnd Inspection. Grantee must maintain records of receipts and expenditures a11d make its books and records relathtg to this grant available to Silverton for inspection at reasonable times. Silverto11 may monitor ru.1d conduct an evaluation of operations unde1· tllis grant, which may · include a visit by Silverton pers01u1el to observe Grantee's program, discuss the program with Grantee's personnel and reyiew fmancial a11d other records oom1ected with the.activities fmanced by tills grant.

4. Return. of Unused Funds. .Any grant fi.u1ds, and ariy income earned on those funds, that are not . spent or con:nnitted for the purposes of the grant, must be returned to Silverton.

-• ..,,,, ~·- ,,,_n ___ , ,_,,.~, ,..,.~4 _,,...,, •-•• ", -·•• '" ,_, __ ,.,u •. ~-~: ____ ,_,... __ ,...., .. ~--•......_..,,,_,, __ , .... _,.w _ _.....,. .. ...,. __ .,.. _ _, __________ ~,-~-~•-••-•-'--


82

August 2, 2007

Carmel J. Williams, Executive Director Fred Hollows Foundation New Zealand Levell, Nesfield House 62-64 Valley Street, Mt. Eden Auckalnd 1024, New Zealand

Dear Cannel:

It is our great pleasure to deliver a grant for $60, 370US from .the Silverton Foundation ("Silverton") to Fred Hollows Foundation New Zealand ("Grantee"). This constitutes a grant in support of Grantee's eyecare activities in East Timor, as more ,specific.ally described on Schedule 1 attached to and made a part of this letter ("Program").

We understand that Grantee will utilize the grant's proceeds only for charitable and educational activities consistent with the operation of the Program. In ·connection with the utilization of the grant proceeds for the operation of the Program, we also understand that Grantee agrees ·to comply with the expenditure responsibility grant provisions attached to and made a part of this letter as Schedule 2.

We further understand that Grantee may identify Silverton as a source of funding for the Program in·· various communications, publications and media to staff, supporters and the public, and Grantee may,-use· Silverton's name and logo for such purposes .. We request that, to· the extent it is reasonably practical and appropriate to do so, Grantee provide Silverton with copies of such communications. We also request that any listing of oontdbutors list the grant as having been made by the Silverton Foundation.

We also understand .that Grantee (1) is an organization that is a community based non"government organization created in 1992 by charter and operated under the laws of New Zealand exclusively for charitable, scientific and educational purposes and (2) accepts and will discharge full control of the grant funds and its disposition consistent with its oha·ritable status, the terms of its charter and this grant letter. Please acknowledge your agreement with the tenus of this grant letter by signing the acknowledgment . on the enClosed copy and 1:eturning it to me for our records.

We are pleased for the opportunity to support the important work of Fred Hollows Fou11dation New Zealand in East Timor, ·

Accepted and agreed to as of , 2007 Fred Hollows Foundation New Zealand

Sincerely, Silverton Foundation, Inc.

By: --:--:---:::-.:::::c-:--::---:--:::::-:--Andrew S. White, Executive Director

By:--,-----,-----:--:--:---Carmel J. Williams, Executive Director

_ .. ·---·--·--· ---~-·-------------.. -·---· ·----


83

I .. I i

I

Schedule 1 Grant by Silverton Foundation, Inc. to Fred Hollows Foundation New Zealand August 2, 2007

-· ......... __ , ....... _, ___ ,_, _________ ,~----·----·---- ------------------


84

Schedule2 Grant by Silverton Foundation, Inc. to Fred Hollows Foundation New Zealand August2; 2007

Silverton Foundation, Inc. Expenditure responsibility grant letter provisions

1. Separate fimd. All Silverton grant funds received by Grantee must be maintained in a separate ftmd dedicated to the charitable purposes described in this letter. Such a separate fund may be either ( 1) a physically separate bank account restricted to the described chatitable purposes, or (2) a separate bookkeeping account (liroited to the descn'bed charitable purposes) maintained as part of your financial records. Silverton encourages, whenever feasible, the deposit of grant funds in an interest beariilg a~count.

2. Repm·ting. A written report signed by an appropi;iate officer of Grantee must be furnished to Silverton from time to time, but no less than semi-annually during each fiscal year in which Grantee 1·eoeives or spends any portion of Silve1ion grant funds until the grant funds are spent in full or the grant is otherwise tern1inated. In addition, within two (2) uionths following the fiscal year end in which Grantee completes its use of all grant funds, a final written report is to be furnished to Silverton with respect to all expenditures under the grant.

Each written report, including the final written report, must contain two parts: a narrative account and a financial account of what was accomplished by the expenditure of the grant funds during the p<:<rioQ.. covered. by the report,

A. Narrative Account: The nmrative account should provide a detailed description of what was · accomplished by the grant, including a description of the progress made toward achieving the goals of the! grant and an assurance that the activities under the grant have been conducted in oonfonnity with the terms of the grant. ·

B. Financial Account: The finanCial aqcount should provide a fmancial statement reporting, in U.S. dollars, all expenditures of Silverton grant ftinds and any income earned on those funds. The fmancial .

· statement should include only Silverton funds received and expended under this grant during the period covered by the report. It is assumed that the financial statement will be prepared from books and records maintained on a fund accounting (cash) basis, Only expenditures made in support of the grant purposes should be charged agamst the grant, and records should be maintained of such expenditures adequate to enable the use of such funds to be checked readily. ·

If written reports are not submitted to Silverton on a timely basis, United States law requires that Silverton withhold further payments, if any, to Grantee and pJ:ohibits Silverton from a~arding any new grants to Grantee,'

3. Record Maintenance and Inspection. Grantee must maintain records of receipts and expenditures and make its books and records relating to the Silverton grant available to Silverton for inspection at reasonable times. Silverton may monitor and conduct an evaluation of operations under this grant, which may include a visit by Silverton personnel to observe Grantee's program, discuss the program with Grantee's persomtel and :review financial and other records and materials connected with the activities fmanced by this grant. .

4. Retum of Unused Funds. Any grant funds, and any income ear11ed on those :funds, that are not spent or committed fo1· the l)tll'poses of the grant, must be retut'lled t? Silverton.


85

Charter documents

e · Attached are the following:

1. Copy of the Memorandum and Articles of association of the Hamlin Fistula Welfare and Research Limited.

2. Copy of the Annual Report of the' Company as at 301h June 2001.

3. Copy of the Annual Report of the Addis Ababa Fistula Hospital at 301h September 2001·.

4. Copy of the Design Document (with amended cost estimates) for the Development of the Rural Village at Siga Meda, prepared for the Australian Government (AusA/0).

'

5. Copies of the approval documents by the Australian Government for donations to the Company's Appeal Fund 'Hamlin Fistula Relief and Aid Fund' to be allowable deductions for income Tax purposes.

5

·-·-------

. I

·------·----·--------------- --~--------· -------------------·-----------·-·-


86

~~ ~-~---~~-------------- ---

' 00 0 -··- oO ~ ~---· .... Oo• 0 ~ ·-- •-· --·M• ···~···--· 0 o 0 ··--- .... --·· .... -.... ... ~----.. --~ - ... ,,_,_ ~- . ·~-·---·------ - ··- -------· ··--·-. . . ......... - .:.. ......... ,_ ,. .. ··- . -

AFFIDAVIT OF OFFICER of

HAMLIN FISTULA WELFARE and RESEARCH LIMITED

The undersigned, to assist grant making foundations in the United States of America to determine whether Hamlin Fistula Welfare and Research Limited ("Grantee") is the. equivalent of a public charity described in section .509(a)(1), (2) or {3) of the United States Internal Revenue Code, makes the following statement:

1. Office. I am the Company Secretary of the Grantee.

2. · Formation and purposes. The Grantee is a community based non-government organisation incorporated in Sydney, Australia in December 1996 as a not for profit Company, limited by Guarantee, not having a Share Capital and operated under the laws of Australia exclusively for charitable, research, mediCal, scientific and educational purposes. The Company conducts Its Appeals for support in the name of 'Hamlin.Fistula · Relief and Aid Fund' which is approved by the Commonwealth of Australia as a Char.ity and that gifts to the Fund of A$2 and over are allowable deductions for Income Tax purposes. (copy of documents attached) . ·

3 .. Programs and activities. (a) General: The Grantee's programs and activities are designed primarily 'to assist the

work of the Addis Ababa Fistula Hospital in Ethiopia, which Is to • cure of patients., free of charge, who are suffering fr-om obstetric fistulae, • giv'e postgraduate training in the techniques offistula surgery, to dbctors frotn Ethiopia

and .other developing countries worldwide. • develop a teaching program designed to assist women to seek medical attention before

going into labour, and • take whatever action possible to help prevent this condition occurring,

This Addis Ababa Fistula Hospital was established specifically for women with childbirth injuries in 1974, by two Australian doctors, the late Dr Reg Hamlin and his widow Dr Catherine.Hamlin AC who is at present the Chief Executive Director of'the Hospital. Both . Gynaecologist/Obstetricians, they were able to develop .a surgical procedure, to\ cure Obstetric Fistulae. Over 20,000 women have been cured as a result of their efforts.

This surgery was first pioneered by an American, Dr Sims in New York in the mid-191h

Century.

Obstetric fistulae is one of the most humiliating of childbirth injuries. It is the result ·of unrelieved prolonged labour, usually culminating in still birth. in developing countries, such as Ethiopia, medical assistance or delivery by a caesarean operation is not readily available outside of the main cities. The extended labour, sometimes for more than 6 days, will cause a hole, or fistula, to occur between the bladder and the vagina and sometimes

--.. -~------·- ..... ·· ,. - ·----. --.---~-~---- ·- _,,_.... ... ______ ·--·--.. -~ .. ------... ~--~---···-·----

·-··-~~-~---................. -... -----------------------·--·-.. ···-.. - ----~ .. --. -·-~---·-- ---·· --·~--- .. '

I

.I I j j

~I

~ .~


87

between the vagina and the rectum. Urine, and sometimes, foetal matter, trickles constantly down the legs of the patient, creating a situation where the woman has a ·most offensive smell. She becomes isolated from her own family and an outcast from her village life. These women live in extreme poverty. Some resort to begging to survive. The Hospital operates on 1,000 patients a year with a success rate of over 90%.

(b) Specific programs and activities by the Grantee in furtheran.ce of this goal have included and will include

• The promotion of an awareness of the work of the Addis Ababa Fistula Hospital and the plight of women ln the developing world, suffering from c:;hlldbirth injuries.

• The rebuilding and extension of the Addis Ababa Fistula Hospital building complex. This occurred over the period 1996- 1999. It included the complete refurbishing of the original buildings; the construction of a new operating theatre;" a new kitchen and laundry facilities; provision of new accommodation for nursing aides and for visiting doctors in training; a physiotberapy unit; a pathology laboratory etc. ·

• The provision of medical and surgical supplies to the Hospital • The. present project is funding the building and development of a 'self-help' Rural

Village, which will accommodate up to 100 patients that cannot be cured and provJde·. for patients undergoing medical. treatment and physiotherapy before having sur·gery. The village is being built at Slga Meda, about 10 miles from Addis Ababa, on 60 acres of land given by the Ethiopian Government to the Hospital for this purpose. A reputable Ethiopian building contractor is undertaking the construction. A local architect is supervising the building work and confers with, and is regularly visited by our Austra!'ian Design Architect. The village is expectedto be completed by mid 2002.

4. Governing documents. Attached to this Affidavit is a copy of the Memorandum · and Articles of Association of the Grantee Company, which sets out the objectives of the Company· and the regulations under which the Grantee Is governed. The Directors do not receive any remuneration and the day by day work ofthe Company is do.ne by voluntary help.

· 5. No improper private benefit. Under the applicable laws and customs or under the Grantee's governing instruments, none of Grantee's Income or assets may be distributed to, or applied for the benefit of, a private person or non-charitable organisation other than (a) as part of the conduct of the Grantee's charitable activities, or (b) as payment of reasonable compensation for services rendered, or (c) as payment representing the fair market value of property which the Grantee has purchased.

5. No proprietary interest. The Grantee has no shareholders or members who have a proprietary interest in its income or assets.

7. Distribution of assets on dissolution: Under the applicable laws and cu,stoms, or • under the Grantee's governing instruments, all of its assets will be distributed upon its

dissolution o1· liquidation to another not-for-profit organisation for charitable, religious,

2


88

"'·--·-·-------·- -·-··-·· ... ···~ ·-·---··---·-·-··- -·- ··-·--·--····-"'- ···-· ...

- ••-• '' •• -•-• '"'' '-·-~·-• • • •••a ",.,._,_,~ .. ·-----,..~------. • .....,_._,,~•• -·-·---- ---·-·-······· ··---···--·-···----

--scientific, literary or educational purposes, or to a government Instrumentality. (see Clause 7 of the Memorandum of Association.)

8. Limits on activities. Under the laws and customs applicable to the Grantee, or under the Grantee's governing instruments, the Grantee is not permitted, other than as an insubstantial part of its activities, to (a) engage in activities that are not for charitable, religious, scientific, literary, or educational purposes; or (b) attempt to influence_ legislation, by propaganda or otherwise.

9. No candidate campaign activity: The laws and customs applicable to the Grantee do not permit it to Intervene, directly or indirectly, in any political campaign on behalf of, or in opposition to, any candidate for public offi"ce.

1 Q. Control by other organisations. The Grantee is not controlled by, or pperated in connection with, any other organisation.

11. Publicly supported organisation. Public support for the Grante.e'. is demonstrated by the Schedule of Financial Support for the four most recently completed· calendar years, attached to this Affidavit.

12. Authorisatfon. The governing body of the Grantee has authorised me to make this Affidavit and affirms its contents. The representations made in this Affidavit are binding on the Grantee.

I decl~re that the foregoing is true and correct of my own kCYwledge.

Date: 191h December 2001 Signature: ~'l:t. {,~,c;..J..v:2c..c.t4 Printed Name: Stuart Noel Abrahams ?-z, Title: · Company Secretary

3.

•~..,....,,,.,,_,._.~-----.. •·-- -·--~r........___, ______________ ,....__.,. .. ______ ,_~_,.,__, _____ ,_,_, __ ,,. ___ , --·-•-~•''"" ,,, ___ _,_,~••~••••"-"'

·-~··-------.~~----·~·--~--~L~ .. ---·-·-··


89

EXHIBIT H

SCHOLARSHIP FUND FORMS


90

THE HIGH SCHOOL SCHOLARSHIP FUND OF


______ , , and ("the Donors") donated the property described on Exhibit A to the Austin Community Foundation for the Capital Area on ---.,--:' 2012. That contribution is to be held by the Foundation as a Donor Advised Fund and distributed by it subject to the terms of this Agreement.

N arne and History. The name of the Fund is "The _______ High School Scholarship Fund" ("the Fund"). The Fund is created by the Donors.

This Scholarship Fund is created in loving memory of (April _, - November _, ) and (November __ , __ - March_, ),

pioneers of the City of Texas. were married May _, and promptly moved to where __ opened an automobile upholstery business. On September __ , , tragedy struck when 's eyes were shot out in a hunting accident. From that day until his death, __ lived in total darkness. opened a newsstand on the Square and later a confection stand in the County Courthouse. They moved to Street to be within walking distance of the Square and lived on __ Street for 60 years. was instrumental in founding the American Legion Post and, throughout their lives, the were active in the Legion. They were life-long members of the Church and were among 's most honored and respected citizens. This Scholarship Fund is created as a perpetual memorial to ______ who overcame life's harshest handicaps and lived courageous and worthwhile lives.

Purpose. The Fund's purpose is to make grants, solely from the income of the Fund, for one or more scholarships to be awarded in , Texas. The grants shall be made to the _____ Independent School District, , County, Texas, for the purpose of awarding one or more scholarships to a student or students attending High School.

Each scholarship shall be awarded to a student chosen by the Advisory Committee during the Spring semester of each school year. That student shall be a graduating senior attending

---- High School who will be attending a college, university, or junior college after graduation from High School. The entire scholarship award shall be distributed to the person receiving the grant during the first week of his or her first semester at his or her institution of higher learning.

The recipient of each scholarship grant shall be a deserving student who has worked hard to reach his or her scholastic and other potential. That potential is not limited to academic potential, but shall include other activities, such as speech, drama, work on the school newspaper or yearbook, sports, and agricultural activities. The recipient should not necessarily have a high


91

academic ranking in his or her high school class. Instead, he or she shall be a well-rounded person who is active in and has participated in school activities and community activities.

Each grant recipient shall have overcome some sort of adversity. That adversity may be, but is not limited to, blindness or some other physical or mental impairment, a learning disability, some language or cultural disability or impediment, or poverty.

One or more scholarships shall be awarded each year in an amount deemed by the Advisory Committee to be significant to the person or persons awarded the grant or grants. The Donors anticipate that each scholarship grant will be of at least $1,000.00 measured in the purchasing power of the dollar in 2012.

Advisorv Committee. The Fund shall have an Advisory Committee to advise the Foundation on the grants to be made from its income. The Advisory Committee shall have three (3) permanent members. The members of the Advisory Committee are the principal minister of

Church in , an appointee of the School Board of the Independent School District, and the President of the Chamber of Commerce. The initial Advisory Committee shall also include and , long time friends of the family of the Donors and residents of and shall each have a seat on the Advisory Committee until she fails or ceases to serve. When and fail or cease to serve their positions on the Advisory Committee shall not be filled.

Income. No principal of the Fund may ever be distributed and any amount ofthe income of the Fund may be added to the principal of the Fund each year. In any calendar year any amount or all of the Fund's income earned in previous calendar years may be distributed for the Fund's purposes. The Advisory Committee may elect to recommend that grants be made of less than the income available for grants in any calendar year and the excess grant money be held for distribution in subsequent years.

Other Terms. The Donors understand and agree that the property they have donated to the Foundation and the income from it will be held in the Fund and used subject to the following conditions:

a. All designated beneficiaries must either be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("the Code"), or constitute a governmental unit referred to in Section 170( c )(1) of the Code. The Independent School District currently meets those requirements. The distributions from the Fund which are to be made for its designated purposes must always be within the scope of the tax exempt purposes of the Foundation.


c. At some time in the future the Foundation's Board of Governors may determine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this

2


92

Agreement is unnecessary, impractical, or impossible, or that the Agreement is not consistent with the tax exempt purposes of the Foundation. In that case, the Foundation's Board of Governors may order any variance from the Agreement and that application of the whole or any part of the principal or income of the fund to other charitable or educational purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as feasible, the intents and purposes of this Agreement.

d. Determination of what constitutes "income" for purposes of distribution shall be reasonably determined by the Foundation and/or the Treasury Department's Internal Revenue Service Regulations.

e. The Foundation's acceptance of this Agreement, so far as permitted by law, shall constitute its agreement to hold, manage, and distribute the donation as set out above.

f. Provisions of the Foundation's Articles of Incorporation as on file in the office of the Secretary of State, along with the Foundation's Bylaws, as amended, shall be followed in carrying out this Agreement.

g. The Donors acknowledge that they have been furnished with the written guidelines of the Foundation relative to "Donor Advised Funds" and they agree that the guidelines will be followed with respect to The _____ High School Scholarship Fund.


_______ , 2012

_______ , 2012

_______ , 2012

3


93

4

_______ , 2012

________ , 2012

_______ :, 2012


by: ____________ _

President

_______ , 2012


94

EXHIBIT A

THE HIGH SCHOOL SCHOLARSHIP FUND OF


Dated April 2, 2012

Approximately ______ Dollars ($_,000.00) of stock of _____ _

5


95

FundName: .

Donor(s): .

Date Established:

COMMUNITIES FOUNDATION OF TEXAS Dallas, Texas

THE [FUND NAME] FUND, A Scholarship Fund

The [Fund Name) Scholarship Fund of Communities Foundation ofTexas, a Texas Non-Profit Corporation

[DONOR/DONORS}, ("[Donor/Donors]")

[DATE]

Agreement: This agreement ("Agreement") is entered into by [DONOR/DONORS] and C01mnunities Foundation of Texas, a Texas Non-Profit Corporation, on the date first written above.

Type of Fund: The [Ftmd Name] Scholarship Fund (the "Fund") ofCmmnunities Foundation of Texas, a Texas Non-Profit Corporation, ("CFT"D is a designated fund ("Designated Fund") [permanently and irtevocably] designated for the use specified in this Agreement, under the ultimate control of the Board ofTtustees ofCFT and is to be operated in compliance with IRS and U.S. Treaswy Regulations to assure the Fund is a "component" of a public charity and not a private foundation.

Disbursements: All disbursements from the Fund are to be made in accordance with the CFT Fund Administration Guidelines ("Guidelines") th~t al'e in effect at the time of the distribution. A copy of the Guidelines in effect at the time of the execution of this agreement is attached hereto as Exhibit "A"" and is incorporated herein by reference. ·

· Co~mittee of Advisors: Written scholarship recipient recommendations .will be accepted in writing from a consensus of a committee "(acting in compliance with the attached Designated Fund Committee Policies). that is appointed and approved by CFT, the majority of which catmot. be made up of the [D.onor/Donors] and related parties. Recommendations shall require at least two committee members' signatures. Scholarships will be granted in accordance with the criteria attached hereto as Exhibit"-" and incorporated by reference. No pat't of this Fund may benefit [Donor/Donors], parties related to [Donor/Donors], including officers, directors, Ol' top management or their "fmnilies connected with -----:----:-~:-:-...,------:----· No employee of has any specific rights in connection with this. Fund.

Corpus and Income: The initial contribution to the Fund shall consist of [ /distributions from the Estate of .] From time to time additional contributions may be added to the Fund. Additional contributions shall become a pa1't of the corpus of the Fund. [Corpus is defined as the book value of contributions to the Fund that are designated by [Donor/Donors] at the time of the contribution as permanent.] Contl'ibutions cannot be designated for the benefit of a pat'ticular individual. . .

[Option for Spending Policy Amount] Distributions from the [returns on the corpus/corpus and net income] of the Fm1d, including grants and non-investment expenses, shall be determined using CFT's Spending Policy ("Spending Policy"). A copy of the cwTent Spending Policy is attached hereto as Exhibit "_" and incorporated herein by reference. Investment retums shall be di~1:ributed mmually in accordance with the Designated Fund grant policies of CFT and be subject to CFT's Annual Administrative and GrantMaldng Fee Schedule ("Schedule") in existence at the time of the fee distribution. A copy of the Schedule in effect at the time of the execution of this agreement is attached het'eto as Exhibit "B" and is incorporated herein by reference. Any fee transfer shall be made from the Fund's income accow1t, if sufficient funds are

-·--·--·-·-·------ ----·--- ----


96

available, but otherwise, from capital gains or corpus. In addition, any unusual out-of-pocket expenses, fees or C01m11issions related to the operations of the Fund shall be directly charged to the Ftmd.

[Option for Endowment] TBB CORPUS SHALL REMAIN IN THE FUND AND THE FUND SHALL BE MAINTAINED [IN PERPETUITY,] [AS LONG AS THERE ARE SUFFICIENT ASSETS TO WARRANT THE CONTINUATION OF THE FUND] AND DISTRIBUTIONS FROM THE RETURNS (Should this be net income?) ON THE CORPUS OF THE FUND, INCLUDING GRANTS AND NONINVESTMENT EXPENSES, SHALL BE DETERMINED USING CPT'S SPENDING POLICY. A COPY OF THE CURRENT SPENDING POLICY IS ATTACHED HERETO AS EXHIBIT "C" AND IS· INCORPORATED HEREIN BY REFERENCE.

[For Non-Endowment Fund] During the lifetime of [:OONORIDONORS], the corpus and net income, and following the death of [DONOR/DONORS] the spending policy amount, shall be available for grants in accordance with the Guidelines and be subject to the Annual Administrative and Grant-Making Fee Schedule ("Schedule") in existence at the time of the fee distribution. A copy of the Schedule in effect at the time of the execution of this agreement is attached hereto as Exhibit "B" and is incorporated herein by reference.

Notwithstanding any provision herein to the contrary, CFT shall distribute such amounts from the Fund as may be required by law, whether by statute 01' regulation.

Investment Portfolio: Donated securities and assets, other than cash or cash equivalents, shall be liquidated as soon as is practical unless it is determined by the Board of Trustees of CFT that it would be prudent to . retain the assets donated or to sell at a later date. In any event, donated assets are subject to the provision~: of:. law, including any statute or regulation, goveming the Fund's ability to retain any such asset. Donors to the Fund hereby release and hold hannless CFT, its employees, officers, Trustees, and representatives for any and all action taken wi!il respect to the assets donated, including but not limited to their sale or maintenance. To the extent allowed by other p1·ovisions in this agreement, col'pus and/or income which may be distributed will be limited to the net proceeds from the liquidation of any assets existing at the time of distribution.

· Pltilanthropic Interests: The philanthropic interests will include:---:-----:----:-:--.----:---::The selection criteda shall include scholastic achievement, school and cmmnunity participation, and financial need ·as detennined by the selection committee. Students are to be chosen by the above-referenced scholarship selection cmmnittee.

Variance Power: The Board of Trustees shall have the power to modify any restriction or condition on the distribution of funds for any specified charitable purposes 01' to specified organizations, if in the Board's sole judgment (without the approval of any trustee, custodian or agent), such restriction o1· condition becomes, in effect, unnecessary, incapable of fulfillment, or inconsistent with the charitable needs of the cmmnunity.

[DATE]

[DATE]

[DATE]

[DONOR]

[DONOR]

COMMUNITIES FOUNDATION OF TEXAS, A Texas Non-Profit Corporation

By:---------.,.-----------------'' President and Chief Executive Officer


97

PURPOSE:

CRITERIA FOR THE [FUND NAME] SCHOLARSHIP FUND OF COMMUNITIES FOUNDATION OF TEXAS

The purpose of the Fund shall be to provide one or more scholarships in the maximum amount of ___ _ per year (or such greater amount as may, from time to time, be determined by the scholarship selection committee to reflect inflationary increases. in costs and expenses) to a student pursuing either a baccalaureate degree or an advanced degree in at any accredited college or university in the United States and its possessions. The selection criteria shall include scholastic achievement, school and cmmnunity participation, and financial need as detennined by the selection co1mnittee. Students are to be chosen by the above-referenced scholarship selection c01mnittee.

SELECTIONPROCESS:

1. Each' applicant must complete an application and submit it by a date to be determined by the scholarship selection co1mnittee. · 2. Each applicant must sub1nit a scholarly paper expressing the reasons for pursuing a degree' in ________ and the need for assistance to reach his/her goal. (Or an interview) 3. The scholarship selection cmmnittee for the Fund shall select the scholarship.reyipients based upon the student criteria and eligibility requirements set forth herein.

STUDENT CRITERIA:

Applications will be reviewed based on the following criteria:

1. Acadetnic achievements. · 2. School activities .and extracunicular activities. 3. Citizenship. 4. Demonstrated leadership potential. 5. Financial need as shown by the total resources available to the applicant and applicant's estimates of the

expected tuition, labo!'atory fees, room/board, book and related academic charges .. 6. Two written letters ofreco1mnendation, one of which should be fl:om an academic advisor or professor. 7. A brief scholarly paper exp!'essing the reasons for pursuing a degree in and the need for assistance to reach his/her goal. 8. No immediate relatives of the Selection Cmmnittee are eligible.


98

ELIGIBILITY REQUIREMENTS:

In order to be eligible to receive a scholarship, an applicant must satisfy the following requirements:

1. ·Applicants must be in good standing as a student. 2. Applicants must be pursuing a baccalaureate degree or advanced degree in courses related to

3. Applicants must have completed at least of college course work by the end of the academic semester during whiol.J, the application is made. 4. Applicants must be in the need of financial assistance. 5. Applicants must be a citizen of the United States. 6. Applicants must have a. college GPA of 2.75 on a 4.0 scale.

AMOUNT AND DURATION OF SCHOLARSHIP GRANTS:

1. The scholarship ap.10unts may vary but will not exceed . (or such greater amount as may, fi:om time to time, be determined by th\') scholarship selection committee to reflect inflationary increases in cpsts and expenses) per calendar year per student. The specific nun1ber of scholarships awarded will depend upon the . amount of funds available and the number and financial need of qualified. applicants.

2. The scholarship may be used for tuition, laboratory fees, books, room, board and related academic charges at· any accredited college or univet'sity in the United States and its possessions. The scholarship monies will be sent directly to the college or university. Any unused potiion of the annual award will be returned by the college or university to CFT for redeposit into the Fund.

3. A scholarship may be renewed on an annual basis upon re-application with reviews ·conducted by the scholarship committee each semester. ·

AGREEMENT:

Once tb:e student has agreed to accept this schohrship, he/she must maintain a 2.75 GPA on a 4.0 scale and · 'complete 12 hours each semester at the college or university. The Shldent must agree to keep Cmmnunities Foundation of Texas infonned of change in home and school addresses and send certified transcripts showing courses, hours taken and grades received as soon as they become available. Failure to complete either of these requirements may result in a loss ofthe scholarship.


99

EXHIBIT I

THE PRINCETON V. ROBERTSON CASE: TOO IMPORTANT TO BE LEFT

TO THE LA WYERS


100


101

' .,


102

The Robertson v. Pri11ceton Case: Too Important to Be Left to the Lawyers

by Neal B. Freeman·

Conunents by Pablo Eisenberg, Peter Frumkin, Heather Higgins, Adam Meyerson, Anne D. Neal, James

Piereson, Terrence Scanlon, ] ack B. Siegel, Tim Walter, and Marti11. Morse Wooster Edited by Krista Shaffer

A Bradley Center fqr Philanthropy and Civic Renewal Cominissioned Paper

HUDSON INSTI'fUTE

February 2009


103

Table of Contents

The Robertson v. Princeton Case: ................. ; ................. l Too Imp01tant To Be Left To the Lawyers by Neal Freeman ·

Commen.ts and Freeman's Responses ............................. 5 Pablo Eisenberg: The Robertson Case Was a Waste ........... S

of Time) Energy and Money Freeman's Response to Bisenberg .............. , .................. S

Peter Frumlcin ............. : ................ · ....................................... 6 Freeman's Response to Frumkin ................................... 7

Heather E-Iiggins .......... .......... : ... ......................................... 7 Freeman's Response to Higgi.ns .................................... 7

A.da1n Meyerson ................................................................. 7 Freeman's Response to Meyerson ........................ · ......... 8

A.lme D, Neal: Lessons for Alumni. and Trustees ............... 9 Freeman's Response to Neal... ...................................... 9

James Piereson ............................. · ...................................... 9 Freeman's Response to Piereson ........... , ..................... 12

TelTenoe Scanlon ........................................ .' ..................... 12 Freeman's Response to Scanlon ................... : .............. l3

Jack B. Siegel..: ................ : ... : ........................................... 13 Freeman's Response to Siegel.. .................................. .15

Tin1 Walter ........................................................................ 15 Freeman's Response to Walter .................................... 15

Martin Morse Wooster ...................................................... 16 Freeman's Response to Wooster ...................... : ........... 16

List of COlltributors.~··········-·····•••n•••••u•·--····••u•·············17


104

The Robertson v. Princeton Case: Too hnportant To Be Left To the Lawyers

by Neal B. Freeman

I t's a.pleasure to work once again with the folks at Hudson Institute. Back in my New York days, I spent

memorable days at the institute's original headquarters on the banks oftheHudsonRiver. Founder Hem1a11Kalm would convene for marathon conversations an eclectic group ofbusiness leaders, journalists, academicians and military brass. Conversations with Herman tended to be highly autobiographical and on one of these occasions, Frank Cary, then the president ofiBM and the only one of our number with the stature to do so, chided Herman for dominating the proceedings. Herman wheeled around-at almost three hm1elred pounds, he; was the world's largest physicist-and· replied, "Frank, you don't undei·stand. Some people learn through the eye by reading, others through the ear by listening. I learn through the mouth by talkh1g."

'Who knows, sometime during the course of these remarks I may become a wiser man myself. ·

You are all genel'ally familiar with the Robertsonv. Princeton lawsuit, the most important donor rights

case since the Buck Trust case a generation ago. I will try to add some color and emphasis to accounts that have appeared in the press. I do so after stipulating that I am speaking only for myself and not for the Ro be1ison family, nor-much as I'd like to--for Princeton University.

The stor)' begins forty-eight years ago tllis month when a young m1d chal'ismatic President exhorted his fellow Americans to bear any burden, pay any price in the cause of freedom, TWo of those fellow Americans, Charles and Marie Robe1·tson, patriots both, answered the call. With officials at Charles' alma mater, Princeton University, they devised a program to. develop young Americans for govei:mnent service in the international arena-foreign service officers, trade and development

officials, :intelllgenctr analysts and such like. In 1961, to launch and sustain the program, the Robertsons made a contributio11 of $35 million. Inside the Beltway, that may sbtmd like loose change spilled :fi:om a bailot~t bill. But it was at the time the largest contribution ever made to the university. It is thus useful to remember as this story unfolds that the Robertsons ru·e one ofPrinceton's most generous donor families. It should also be noted that the· Robertsons were private people who \>irere assured by Princeton that their contribution would remain anonymous.

The new program, housed on campus at the Woodrow Wilson School of Public and International Affairs, got off to a promising stali-so promising in fact that the mmor began to spread, and then take root, that the lavishly funded progrmn was in actuality a CIA front. Fearing damage to its academic reputation, Princeton then asked the Robertsons for a second contributionthis time, the gift of their privacy. The Robertsons consented, their patronage was publicly acknowledged and Rober~son Hall, designed by the eminent architect Min.oru Yan1asaki, became the v.isible symbol of the school.

Over the decades that followed, the Wilson School grew in reputation and influence, becoming both an ornament to the university and a resource for the nation. The h1itial Robe1ison gift of $35 million grevv just as impressively. After giving' away htmdreds of millions to support the Wilson School, the Robertson FoLU1dation-the si.tpporting organization set up to · administer the family contribution-had amassed assets of approximately $930 million by late.2007. This stellar investment performance, i11 perfect symbiosis, fueled the ongoing academic excellence. TheRobertso11 Fou11dation-dh·ected. by a board comprising four university appointees and three family members-was

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regarded as an unqualified success; indeed, as a model of to divide the family and exhaust its resources. And so collaboration between a donor family and an academic the battle was joined ... institution.

Over time, of course, the founding generation gave way to successors. On the family side, Charles and

Marie passed 011 and were succeeded in family lead

L et me offer some observations on the winding course of this case that led to the settlement rumounc.ed

last month.

ership by their four children and a cousin. Leadership First, as Herman Kahn might have put it, a word about tut'11ed over periodically at Princeton, too, bringing in the correlation of forces. 011 the Robertson side, '''e had people who had not been present at the creation of the three first-class law firms-trial counsel in Califomia, foundation and seemed to the family to be less collegial local counsel in New Jersey, settlement counsel in New and, ultimately, less committed to the founding vision. Yotk. We had nvo publicity offices. We had more than As the years passed, squabbles over procedural issues a dozen expeti witnesses, each a brand~name specialist began to harden into principled disagreements. In the in some obscure corner of the nonprofit world. view of the second-generation Robetisons, the founda- And we had a cadre of donors ru1d would-be donors tion was falling victim to mission creep. They became around the country that followed the case closely and particularly concemed that the Wilson School was no provided sympathetic counsel. My own role fell under longel' turning out enough first-tier cru1didates for the · the category of litigation support, in which capacity I foreign service. In one cohort of 66 Wilson students, hel1'ed to give shape and direction to the case, while for example, only three had entered the fol'eign service. maintaining such coherence as we could ben:veen our More fi·om that same cohort had gone intd management twin cru11paigns, the one in the court of.· law and the .. consulting, more into investment banking, more into other in the court of public opinion. (Yes,: tb:e:. great

. exotic quarters of the financial services industry. ViThile Irving Kristol was correct when he observed that the those professions inay have been warmly esteemed in ]Jroblem with contemporar>' society is that nobody the offices of the Princeton Alumni Fund, they were can tell you '''hat they do for a. living in twenty~ five taken as warning signals by the Robertson family. The words or less.) I had never been engaged in high-stakes Wilson School seemed -to be morphing into some hy· litigation before, but I regatded our team as formidable, brid form of business school. As the data crystallized and likely to be irresistib~y so. We had good people and year to year, the Robertsons came to believe that mis- · plenty of them. That opinion was formed, alas, before sion creep had tumed into mission deflected, ifnotmis- fhe massed legions of Princeton University lumbered sion aborted. Princeton seemed committed to a course on~o the field. In the conflict that followed, we might that theh· pru·ents had not intended and would not have as well have been cast as the Tibetru1s, with Princeton supported. as the Chinese a1'my. What we discovered over the

After years of disagreement a11d contentioLtS meetings, the family filed suit in July 2002. In their complaint, the plah1tiffs sought what their lawyers referred to as the "death penalty"-the transfer of the foundation's funds to other universities· willing to carry out the Robertson mission. It is accurate to say that the lawsuit was· filed and then pursued more in sonow thru1 in anger. B.oth of Charles and Marie's sons were themselves devoted Princeton alumni.

The university responded to the suit with a flurry of press attacks on the Robertsons-which I will not rehearse here-and launched a war of attrition designed

next six anq one-half years is that if you walk down any corridor of New Jersey powe~'-be it business, labor, law, media, finance, philanthropy or academiayou are lilcely to find ensconced. h1 the con1er office a. chauvinistic Princetonian. You are virtually certain to find a person who hopes to send his or her children or grandchildren to Princeton. I have encountered such intensity of institutional allegiance ohly twice before. First at the US Military Academy. During 111Y' \Vhite House Fellows days, I was surprised to find that Army officers, by then well established in theh· careers, still measured each other by how they had performed in classroom and PT contests waged fiftee11 years eru·!ier at West Po,int. Indeed., we know from their writings that

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even Eisenhower and MacAtihur, well into late middle age, continued to eye each other through the prism of their performance as cadets. The other example is Yale. I returned to New Haven as ajoumalist in2004, curious to leam why almost all of the stars of that political season had sprung fi:om the same small college-George Bush, John Kerry, Howard Dean, Dick Cheney, Joe Lieberman. \lil11at I found at Yale was that curiosity ran elsewhere ... to the question of how J ol111 Edwards had somehow managed to infiltrate theit· ranks. The point he1·e is that Princeton was the home team and we were the visiting squad. Home court advantage was a factor from beginning to end, a reality that was punctuated by the home-town press coverage of the settlement itself. Readers of those stories could be forgiven for thinking that all of the issues had somehow been compromised away and that there had been no clear winner in the case.

Let me make a second point about the ·]ega! process. Watching big-time litigation up close should require parental consent. The process is nasty, brutish and long. Ofthe various motions filed by Princeton, none of them sought to sharpen the issue or resolve the case, all of them had the effect of detaying the proceedings, and not a few of them should have been memorialized on plaques in the Museum of Legal Nonsense. I am not a lawyer and I am tints not closely informed about the term "legal abuse," bu{ to my untrahied eye there was massive abuse cif the system iri this case. In her statement on the settlement last month, the President of Princeton .opip.ed that it was ''tt•agio" that Prh1ceton had been obliged to spend almost $40 million on legal fees-money that could have been better spent on education. I would observe, with due respect, that it was at the very cm:y of Princeton's strategy to run up the legal bills and starve out the Robertsons. The Robertsons were ready~indeed, eager-for trial by 2004.

One result of a war of attrition is ... attrition. On the family side, one of the original plaintiffs died. J'0:embers of the third ge11eration grew to matul'ity and sought a voice in family councils. The original trial judge re· tired. His successor, swamped with administrative work, had to withdraw fl·om the case. Her successor, a third judge, was called out of retirement to preside at t1'ial. On the Pdnceton side, it should be conceded,

there were signs of subtle itnprovement over the years, as the Wilson School seemed to tack back toward the original Robe1ison mission. I leave it others to determine whether this late vocation '''as a matter of con~ viction or of case-related optics. Pri11ceton even began a publicity campaign highlighting the contributions to public service made by its illustrious graduates. There~ suits were mixed. One day I opened a document to find a glowing endorsement of the Wilson School fi:om its distinguished alumnus, Eliot Spitzer. Shortly thereafter came the news that the Governor had been conducting interstate commerce at the Mayflower Hotel. He was quickly replaced in the campaign by equally devoted Wilson alumnus, Anthony Lake, about whom we have heard nothing but good things. And on the investment side, performance turned dramatically, from what had been llotably good to what became alarmingly bad. Over the past year, the Foundation fund, as a consequenc.e of Princeton's huge bet on so-called alternative investments, has plunged precipitously. In its ill~fated attempt to out-Yale Yale in investment ~per.formance';.: Princeton had loaded up on private equicy,.hedg~e:funds and other illiquid assets. My guesstimate is that at tire time of the settlement the fund had declh'led to $58'5 million. (I should note that PrincetoJ) has disputed this figure, while declining to release supporting data.)

L et me comment, :finally, on the settlement an~ wht;1-t it means for tbe world of philanthropy. Just to re

mind you ofthe facts: Princeton pald $100 million to settle tl1e Robertson. lawsuit, the largest 04donor il1tent" award in histoJ'y. · ·

One of the most heul'lstic documents produced during the discovery process was an audit of fom1da:tion spending. One of the Big Fom· accounting fixms, PriceWaterhouseCoopers, had been commissioned by the family to conduct a forensic audit of Robertson Foundation accounts. What PWC found was that large chunks of overhead had been misallocated, that professors and other personnel had been improperly billed to the foundation, thattheconstruction of a building Ul11'elated to the Robertson program-a building t-had been charged to the foundation. In total; according to PWC, more than $100 million of fmmdation f1mds had

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been misused by university officials.

Now, as it happened, the trial structure prescribed by the court would have begun with a presentation by the plaintiffs of the ·basic 'PWC findings. Day .after day, a chronicle of Princeton's alleged misdeeds would have UJ.1folded in the media capital of the world. Even at this distance, one can almost hear the tatmts of the tabloids, the clucking of The New Y01•k Times. In my view-regardless of the verdict in the trial-Princeton's reputation would not have been stained; it would have been irrepatably damaged. For Princeton to settle was a thoroug(1.ly rational decision.

The family had its own calot!lus of concerns. You've all heard the wisecrack, "If somebody says, 'it's not the money, it's the principle of the thillg,' you can bet it's the money," For the Robertson family it was, clearly, about the money and the principle, They wanted the money to carry out the original i.nte11tions of their parents to develop young talent fol' the foreign service and especially now, when a young and charismatic President has called on his fellow Americans to regenerate the soft power of diplomacy, The Robertsons also sought to uphold the lapidary principle that when a contribution is made for Purpose A, it cannot and should not be diverted .to Purpose B. They sou~ght to uphold that pr41-ciple not only for their OW11 family, but fot' donors and grantees everywhere. They succeeded. For donors, this ·case has brought a heartening example; for grantees, a sobering effect.

There were absolutists 011 both sides of the· case-those who sought, on the one hand, a Mosaic reaffirmation of the Eighth Commandment or, on the other, a clarion declaration that donor rights should expire the moment

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· the check cleai's, The absolutists were destined for disappointment at trial. In all likelihood, the verdict would have tumed on an esoteric. legal point, a conclusion fascinathlg to a few dozen la\ovyet·s and frustrating to a few million laymen, I sense no buyer's remorse on either side, The Robertsons reclaimed ftmds sufficient to the family task and secured at least for this generation the principle of donor rights. Princeton, for its part, was publicly embarrassed and financially penalized, but it managed to avoid the death penalty. Even before the legal contest was resolved, Princeton set up a new Of· .fice of Stewardship, whose responsibility it is to conform campus spending with donor intention. At this moment in time, the safest place on the planet for donor intent may well be Princeton, New Jersey,

At the risk of grandiosity, let me conc~ude by stating what I think this case means. At the heart of every charitable contribution is the concept of trust-trust by the donor that the grantee will do what he has agreed,to do, . If that trust is allowed to erode, if the donjllr can :rto, lo11".· ger rely on the grantee's assurance, then ehauitaMe contributions will decline and the civil society they sustain will decline along with them. If that were to happen-if the private, voluntary, civil society that Tooqueville fi1·st acclaimed, and that the Bradley Center still celebrates, were to wither away--America would abandon one of its defini11g national traits. Absent a vibrant civil society, only go:venunent would be. left to fill the social vacuum and the America of tomorrow would come to look very much like the Europe of.today,

As you work your way through your list of New Year's resolutions, please remember to· thank the Robettson family, They have rendered a public service i.n the highesttraditions ofthe Woodrow Wilson SchooL

Neal B, Freeman. is chairman. ofthe Foundation. Management Institute. He can be reached by e-mail at nectlV'[email protected]. com, ·

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Comments and ·Freeman's Responses

Pablo Eisenberg: The Robertson Case Was A Waste of Time. Enercy and Money

The lawsuit brought by the Robertson family against · Princeton University for allegedly violating donor intent has been a waste of money, time and effort. Its resolution should bring a sigh of relief to all parties .co11cerned, especiaily the Woodrow Wilson School for which this affair was a major distraction,

The out-of-court settlement is being touted py some conservatives as a victoty for "donor intent," since the second generation Robertsons claimed that the money fi·om the Robertson Foundation had not been used to graduate sufficient numbers of students for work in public foreign service organizations. These advocates should be reminded that the donors were Charles and. Marie Robertson, not tbeir children who sued Princeton.

All the evidence points to the fact that Charles and Marie were satisfied with the Woodrow Wilson School's work and record. Until their death, they did not complain about the use of their m.oney. As board members of the Robertson Foundation, composed of three family members and four representatives of Princeton, they approved, along with other family twstees, the "Bowen formula" for financing the school for ov.er forty years. Not until recently did their children. object to the original agreemt:lnt between the university and the Robertsons. Donor intent should be measured by the views and attitudes of the original donors, not those of their progeny~ By that measure, donor intent clearly has been maintained by the ~miversity.

The original foundation's Cetiificate of Incorporation states that the scho~l will be a place where students can prepare themselves for a. career in public service, with a special emphasis on areas of the federal govemment concemed with intemational relations. It does not say that the school would only be a training

ground for career foreign service officers, a point the younger Robertsons seemed to stress in their law suit. The younger Robertsons appear to have been piqued both by a narrower view of the school's purpose and the board's decision to hire a professional investment firm to manage the foundation's investments, a change which greatly enhanced the foundation's assets.

Advocates for the Robertsons stress how few graduates of the school seem to have entered the foreign service. One has to note that ·with the advent of the Reagan administration the appeal of government service for young people lost much of its allure. Over the past 25 yea\'S gove111ment Service haS been \1ilified by p0liti• cians, mostly conservative, and many of our brightest, but disillusioned, civil servants left to go elsewhere. Budget cuts, the downsizing of our diplomatic corps and the elimination of the US Information Agency also resulted in fewer opp01iunities for graduates interested in foreign Sel'Vice, No wonder there was not a massive demand for a foreign or govenm1ent .servjpe .career; .but that was·not.the school's fault. .. ;

Yet despite these obstacles the employment statistics of graduates are impressive. Between 1973 and 2006, 72.5 percent of gl'aduates chose to work in public or non· profit sector, including 41.5 percent who went to work in govemment service. In 2006, 88 percent of gtaduates chose employment in the pu~Iio or nQnprofit sedor, 59 percent of whom entered government service. That is an in1pressive track record, laying bare the fatttous claims of the younger Robertsons.

Over the past 45 years, the university may well have improperly used a little of the Robertson money or made some aocotmting errors, but 0~1 the whole it has run an outstanding program which made the original donors proud and would still make them proud today. The children have made a philanthropic mountain out of a molehill. ·

Freeman's Response to Eisenberg

I agr~e that, .for l'v1r. Eisenbel'g and h~s fellow Princetomans, th1s case was a waste of time. The expe1i

witness on this point is Richm·d Levin of Yale. Dr.

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(

Levin has ju.>i: completed a remarkable 15-year run as president, dtu·iJJg which time he ~:rverhauled the physical plant, filled in the blru:iks in a world-class faculty, improved the student experience by eve1y measureeven as he grew the Yale endowm.ent faster than any of its peers. Just as one index of the esteem in which he is held: Levin's subordinates in the Yale administration have been recruited for top jobs at Oxford, Cambridge,. Pennsylvania, and Duke. In an anniversary interviel''" celebrating Levin's many achievements, this exchange occurs:

Q: If you were to pick something ofwhiclt_you'd say, "I could have donethis bettel'," what would that be?

Levin: The·Bass gift [of $20 million for the study of Western civilization, which Yale returned in 1995] remains the best example. 1 should have moved quickly to implement the program Mr. Bass intended. Because ·the issue was complicated, I didn't deal with it hrnnediately. It was a good lesson. Subsequently, when there has been a sign of trouble, ·I have been much more vigilant.

Exactly. Princeton should have settled the Robertson case in 2002. Better still, Princeton should have been sufficiently vigilant to deal with the Robertsons' concems immediately, long before the family felt com· pelled to file suit.

As for the Ro beri:sons, the case was not a waste of time. Indeed, it's difficult to imagh1e how they could have spent' their time n1ore productively. They reclaimed their parents' legacy; they struck a reverberating blow for donors' rights; and. they won $100 million to cal'ry out their philanthropic mission. General opinion has regarded this result as a win-win-win, made all the more unambiguous by Princeton's implicit admission of culpability. (There may be certain philanthropic situations that only nonprofit experts are fL1lly equipped to misunderstand.)

I have admired Mr. Eise11berg's trenchant commentary overth~ years and thus I can'thelp but notice when he's off his game. This statement, for i1Jstm1ce: "The out--of court settlement is being touted by some conse111atives as a victory fm· 'dono1· intent.'" Notice, first, the quotation marks, which signal the reader that he or she is about to

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encounter a preposterous notion, much in the way one comes across a reference to ''flying saucers." Notice, second, that the only people ,,,rho seem to be falling for this preposterous noti~n are some conservatives, by which phrase I think Mr. Eisenberg intends to SLU11mon not the ghost of Edmund Burke but a visage of low intelligence and mean spirit. ;\Vel!, take a hypothetical example. Suppose that Mr. Jones offers a contribution to Mr. Smith to build a biology lab. Suppose further that Mr. Smith then takes the check and builds a hockey rin1c instead. Is this an ideological act? If so, by whom, and to what ideological end? Or is it an old-fashioned wrongful act? Is Mr. Smith saying in so many legalistic words: "You can forget all that talk about the bio lab. We now control the money and we're. going to build a hookey rink.~' And if that is what Mr. S111ith is saying, is that an approach that some liber•als would embrace? Or is JY.fr. Smith of the mindset that would use quotation marks as tongs, holding at arm's length a principle so fundamental to the plillanthropic transac;ti0n .. .as donor: ·intent? ·

Quite Jpart from the ~roblem of donor intention torn or t\¥isted is the problem of misused funds-money spent on projects unrelated to even an elaborately evolved sense of mission. :tv.IJ:. Eisenb~rg's insouciant shrug reflects a position that~ to my lmovirledge, no fiduciary has dared to take. In public, I mean.

Peter Frumkin

Standing at the end of a long line of oases before it, the Robertson case is yet one more instance in

which well~meaning dono1·s have had their intent modi:fied-ru1d at times. fully thwarted-by equally wellnieaning recipients. While Princeton did enlarge the pmvose of the original gift, few could argue that the Woodrow Wilson School has not contributed to the public good by preparing leaders for all forms of public service. I think the compromise WOI'lced in the case actually represents a fair resolution of the matter at hand. It would be unreasonable to demand the entire gift be returned and it would also be unfair not to give the family a chance t~ redirect some of their gift towm·d its p1·e-

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else original purpose.

In trying to fashion solutions to challenges :fi•om donors, the courts face a difficult problem. Often it is very hard to determine when a charitable intent has become linpossible or impracti~al to implemer~t. Equally difficult is the task of even deciding what constitutes a legitimate interpretation of the purposes of a charitable gift. While the past several decades have seen many other cases like Robertson and while trust la\vyers have tried to find ways of crafting ever more airtight expressions of charitable intent, problems like the one encountered by the Robettsons are likely to continue to arise. Why? Two reasons: Death leaves the one person who really knew what was intended out of the process. Second, the passing of time inevitably changes the. conditions on the ground. Donors who are very concerned about

·preserving theh· intent in perpetuity should recall Camegie's dictum that "to die rich is to die disgraced." They should simply avoid endowment gifts altogether and make instead operating grants while they are alive. In the end, this is the only sm·e solution to the problem of donor intent.

Freeman's Response to Frumkin ·

One other practical poh1t: Donal's are increasingly aware that many universities view donors as a necessary evil to be bome patiently till the funds are received, and then ignored. But on a personal basis, the sucking up is often sufficiently convincing to persuade donors that that it is their good fortcme to be the exception. Even if that's miraculously true, remember that . people make policy and interpret intent; v,:hoever it is that you have the good relationship with \will someday be replaced with someone else. The Robertson case is a cautionary tale about the perils of creating gifts that go on in perpetuity l'ai;her than having limited lives and the opportunity to renew ... or not.

Freeman's Response to Higgins

M. · s. Higgins makes the point better than I did (an annoying habit of hers). There are. no lasting

solutions to the problem of human iovealmess and the Robertsons do not claim to have devised· one •. Etemal. vigilance, as someone once put it in a diEfer:ent,·connec-tion, is the condign respOllse. '-

Adam Meyerson

M r. Fnunkin's comments are both irenic and solo- Thel'e are three important numbers to remember in monic. My only suggestion would be that, in his the Princeton-Robertson settlement.

next life, he become a judge, preferably in New Jersey.

Heather Higcins

14 percent is the proportion:ofMasters in PublicAffait·s alumni. of the Woodrow Wilson School between 1973 and 2006 who took jQbs upon gradt.tation who went to work for the federal government in international

Thanks toN ()a[ Freeman for marvelous oommenta1'y affail's. (Another 11 percent went to work for the federal on Robertson v. Princeton, and. to the Robertsons · government overall, and another 17 percent for ·state,

thems~lves for havb.1g the fortitude and principle to see local, an0 foreign governments.) The explicit purpose of this through. Such examples will be particularly impor- Charles and Marie Robertson's giftto Princeton in 1961, taut as we confi·ont those who think donor intent is a then the largest-contribution in the university's histm·y, smoke screen-the Wall Street Journal ill a December was to create a graduate school to prepare students 24, 2008 editorial reported that Congressman Becerra "for careers in govemment service (particularly federal "told us the whole idea of donor intent is a 'convenient government service in areas concerned with international excuse' used by philantlu·opists, like saying 'the devil relations and affairs)." The Wilson School's gi·aduate made me do it"'-and those who believe tax-exempt program is an outstanding academic institution, and its funds are really public money in private trust. On,e fears distinguished alumni include the likes of General David that the short-sighted temptation of getting at all those Petraeus and President Clinton's National Security golden eggs will once again lead to the practical evis- Adviser Anthony Lake. But if Princeton had focused ceration of the producing goose. more of the Robertsons' gift on its primat·y purpose,

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as the university began to do dm-ing the comse ofthe litigation, their heirs would never have launched this costly lawsuit.

$l 00 million is the approximate total that Princeton will pay to settle the lawsuit-$40 milliou to reimburse the plaintiffs' family foundation for the costs of litigation, and $50 million plus interest to estEJ.blish a new foundation to achieve the donors' original purpose. This astonishingly high sum is a significant partial victory for the Robertsons and for the cause of donoJ' intent. Princeton can also declare partial victo1'Y· The university will now legally enjoy unrestricted access to most of the Robertson funds-currently totaling about $700 million-to spend as it wishes. But the magnitude ci{the settlement is a recognition that there was sufficient merit in the Robertsons' charges to bring the case to trial. As are· suit, universities and other grantees in the future will pay more attention to understanding, clarifYing, and at least initially adhe_ring to the intentions of their donors.

$40 million was the cost of the litigation for the Robertsons. Donors throughout America owe a great debt of gratitude to the Robertson family. They fought like tigel'S to honor Charles and Marie's phllanthropic in· tentions, and to publicize the violations of donor intent that sometimes occur in university giving. But the enormous 09st of such litigation will be prohibitively high for most donor families, and suggests that lawsuits will be used only as a rare recolU'se in conflicts over donor intent, at least in cases with deep-pocket defendants such as Princeton.

For donors, the Robertso11 case is a reminder of three lessons.

Be wary of gifts in perpetuity. Endowment giving fo1' tmiversities and other institutions should be approached with great caution. In pa1ticular, donors should be aware that grantee organizations can dramatically change their world views in future generations.

Consider intermediaries. Donors who do want to leave endowment-like legacies may want to give to interme· diary institutions that can disburse funds according to whether the ultimate grantee is fulfilling the purposes of the gift. The supporting organization structure that was

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used by the Robertson Fot.in.dation (the board included family members b.ut was controlled by Princeton) is not necessarily an effective protection for carrying out phil~ anthropio h1tent afte1; the donors' death.

Write it down. One reason the Robertson family was able to proceed as far as it did with its case against Princeton is that Charles and Made Robe1tson wrote down clearly the purposes of the graduate school they established.

Freeman's Response to Meyerson

M r. Meyerson has the basics of the story right, but some ofhis numbers are drawn from press releas

es and are thus colored by advocacy. The only mnnber that has to be accosted here is the $700 l11illion ~'currently" in the. Robe1tson fund. If only. As late reports. drift in fi·om dark precincts of the private:equity.world; .. it may well be that my estimate of$585 r.ii:iHion is off to the high side by a substantial margin. Either way, we'll find out in a few months at the end of the fiscal year.

More substantively, I would concur withMl'. Meyerson's three cautionarY and characteristically sensible lesso11s, to which I would:add a fomth. In some donor circumstances, the best option of all is to include a sunset provision, whereby the foundation goes out of business at a time certain or, more commonly, a circtimstance certain. Foundation executives, not to mention the.ir accouqtants and lawyers, can be understandably slow to appreciate the mel'its of such a provision, but sunsetting can be the apposite answer for some family philanthropies.

And a word about those Princeton PR people. They were nothing if not stakhanovite, but their bump and hustle sometimes overtook plausibility. A case in point. Vlht?l1 asked to explai11 why they had settled the case, Princeton stated that, while they were confident they would prevail at trial, it would cost at least $10 milli01~ to iJy the case. Let's see. Pl'inceton paid the Robertsons $100 milionrather than pay $10 million in legal fees to kick their butt in court? I don't think so.

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Anne D: Neal: Lessons for Allll1111i and Trustees highest ideals. Fo:r that, ahunni, trustees and all those concerned about higher education should be thankful.

\1 Jhen discussing national secmity matters, PresiV V dent Ronald Reagan was fond of saying "trust

but verify." Thanks to the Robertsons, alumni and trustees should now think the same way. In the past, most alupmi believed they could give no-strings attached do-· nations to their alma maters, trusting,. as Neal Freeman says, "that ·the grantee will do what he has agreed to do." The Robertson case at Princeton, like the earlier controversy over the Bass gift at Yale, has shown us that uniVersities have broken that compact of trust As a result, it is now imperative for devoted alumni and trustees to take an active role in ensuring their alma maters live up to the high standards of excellence and h1tegrity expected of them.

Freeman's Rem~onse to Neal

I am grateful to Ms. Neal f01;reminding us of the singular contribution of the Robertson family to the cause

of responsible grantmaldng. There has been much muttering over the years on the subject of donor intent-muttering abbut commitments bent and broken, muttering about deals that turned out not to be deals-but real progress could be achieved only when somebody drew a line in the sand and said, "This far and no further." That's what the Robertsmls did, at conside1•able risk to theh· otherwise comfortable lives, their fortunes, and (at

. least when the PR machines were cranked up fi.lll blast) When giving to a university, donors must apply the their reputations. They gave new life to the tired consame kind of cliligimce and vigilance they would when cept of donor intent. We hope that Ms. Neal and others maldng any other comparable investment. Donors have in a position to do so will consolidate the Robe1'ts011 a responsibility to make sure that they give wisely~ victory and build productive, respectfu(;.-relati'onships• which 1i.1eans, finding a faculty fl:iend, targeting their between donors and grantees. •!.

gift to a program close to their heart, clearly stipulat-. ing their instmctions in writing and following up to en-

sure that the donation is.properly inlplemented. Since James Piereson the special protocols of higher education make giving particularly challenging, donors are frequently unaware of vyhich questions to. ask, much less of what consti" tutes an acceptable answer. To help clarify matters, the American Council of Trustees and Ah,1mni created its Fund for Academic Renewal and published The Intelligent Donor~ Guide to College Giving.

Donor vigilance, of course, in no way detracts from the university's own responsibility to carry out the donor's intent: The fact is, alumni give more than $8 bi11lon a year to their universities-a massive source of fmancial support for higher education. Boards would be well advised to take steps to affirm their commitment to following donor intent, especially in these straitened times. They could, for starters, create a stewardship committee resporisible for the'review and monitoring of large targeted gifts, and also explore other ways to address donor concems.

. The Robertsons have shown us that thought:fhl, targeted gifts benefit universities as they call them to fulfill their

Judging by. the post-settlement conm1entary, Princeton University and the Robertson family remain as

much at odds now over tl1e meaning oftheir agreem·ent as they vvere during the coui'se oftheir contentious liti~ gation. Neal Freeman, in hi.~ducid summary of the cas·e, describes how over the course of many decades the university ignored the terms of :its initial agreement with the Robertson family and then during the course of the lawsuit stonewalled and stretched out the litigation as a strategy to bleed tl1e family with mounting legal costs. In the e11d, as Mr. Fl"eeman says, the university even~ tually gave in for fear of embarrassing material about its dealings with donors that would be brought out at trial (some of which had already been published a few years ago h1 The Wall Street Journal). The settlement decreed that the university would pick up some $40 million in legal costs incutted by the Robertson family h1 the course ofthe litigation and fund anew foundation controlled by the family to train students for work in govermnent service. Mr. Freeman judges the settlement to have been a victory for the pdnciple of donor intent.

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Princeton University, however, continutes to talce an entirely different view of the matte1·. In a letter to The Chmniole of Philanthropj, (January 29, opposite page), Robert K. Durkee, vice president and secretat·y of the tmiversity, declares that Princeton was the aggrieved party a11d that it was the descendants of the Robertsons who, in fact, broke with the intentions of their parents. ·"It was the Robertsons, not Princeton," he writes, ·"who were trying to overturn the donor's intent." In his view, due to a sophisticated public relations campaign mounted by the plaintiffs, the press mistakenly "bought into" the Robertsons' view that the university had violated the tenns ofthe original196l agreement. Mr. Durkee seems especially bitter about the fact that the Robertsons were able to draw upon the resources of another family foundation, the Banbury Fund, to cover costs of litigation (thereby :Emstrating the university in its tactic of bleeding the :Eami!)r through legal expenses). He thinks, in retJ:ospect, that it was· a mistake for the tUliVersity to have created a suppoii:ing organization to administer the grant which eventually provided an opening to the family to challenge the university's adlmnistration of the funds. It would have been better for the university simply to have accepted the gift with restrictions so that no one later would have had standing to challe11ge its control ofthe funds. ·

It is hard to accept Mr. Durkee's version of the case in view of the material that has already been made public showing.that university officials goi11g back several decades chose to ig1ior~ the terms of the gift and deliberately spent ftmds on purposes unrelated to the tJ·ain~ i11g of students for goverrunent service. As that purpose, originally inspii·ed by President Kennedy, lost its cache atnong academics from the late 1960s 011ward, the university bega:n to divert Robertson ftmds· to other academic purposes more h1 keeph1g with the trends of the time. It is perfectly understandable why the university did not want this material opened up for public discussion, in view of the effects it might have had on cutr!OJnt and future donors to the institution. On the other hatld, the a.cademics and administrators at Princeton Universit-y no doubt feel that they must adapt ti1eir academic programs to changing times and ch·cumsta:nces and that such programs oam10t be bound and limited by agreements made with donors a half century ·ago.

Such loud disagreements bet\veen the parties are rather unusual in the wake of such legal settlements because

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they usually wish to "move on" and place, behind them tl1e tlllpleasant accusations a11d allegations that are typicaJ.ly exchanged during the course of an expensive lawsuit. They are a measure of the continuing acrimony between the family and the university that must have been built up not only during the course of the litigation but over the many years that preceded it.

What lessons, however, should "innocent bysta11ders" take from this important case?

From the standpoint of donors, the case itself, along with Mr. Dul'lcee's commentary on it, points to the dangers of'awarding endowment gifts to colleges and uni~ versities in order to achieve some well defl.ned purpose. It is very difficult over a long period of time to hold an institution to any·such purpose. The administrators who negotiated the agreement pass on and are replaced by deans and professors with no personal lmowledge and little concem for it. The principals (generally of ad~ vanced age) who awarded the gift soon pass,on .... The, money eventually begins to slosh about,.\tin ·a:.gJ:owing endowment to be deployed to any mnnlJel"of'needs of the moment. The purpose itself may lose its urgency and impmi:ance in the academic setting or eve11 in the wide1; world. Many colleges and universities today administer endowments awarded years ago to study .the Soviet Ui1ion. Perpetual endowments, contrary to· lvlr: Durkee, are not the best means for donors of achieving such purposes. ·

It might have been better for the Robertson to have made .a. pledge to Princeton· University for a period of years to underwrite their stated purposes. A portion of the funds might have been paid out at the beginning of the prqject, with additional funds released lateJ' on the· basis of performance. The term of the gift could have been e1..'i:ended out to as long as :fi.fteen or twenty yeru:s and either folded up atthatthne or extended for another period. It. is difficult for atlyone to look into the ft.ltm·e beyond such a time frame and thus unwise to project any well~defined purpose much further out on to the horizon. Many donors, in fact, prefer to make such gifts for far shmier periods oftime-three or five years being the preferred standard, with extensions based upon reviews and performance. Donors have need of such a .practice in order to counter the position suggested by :tv.f.r. Durkee-thB:t once the money is in '!;he university's hands, it alone is the final arbiter as to its use.

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Robertso1i v. Princeton thus stands as a reminder to do- Terrence Scanlon nors that theu· gifts to colleges and universities are not self-executing.

Freeman's Response to Piereson

M r. Piereson's comments are both measured and in-. structive. I '''ould add only the following gloss.

I should have made it clear in my paper that the Robertsons have in fact moved on. They are fully engaged in building their new foundation. I, too, have moved on, although I found irresistible Bradley Center Director Bill Schambra's invitation to refi,ect on the 'case, which riveted the attention of donors and wouldbe donors for almost seven years.

Pl'i.nceton oa11110t move on quite yet. It has unfinished

N eal Freeman aptly sturunarized his assessment of the Robertson v. Princeton case in a December 11

commentary he \\'l'Ote for the American Speatatol' Online just after the settlement was annotmced: "Princeton blinked." I think that's about right.

Freeman noted there that after a six-year war of attrition, Princeton was starting to look like the "Dennis Kozlowsld of .American universities." The scliool acted like an arrogant bully in rejecting the family's charge that it was misappropriating funds intended for students . to build careers in govermnent service. Had the case gone to trial, th~ Robertsons were prepared to present evidence in cotut showing that Princeton misused as much as $200 million dollars from the Robe1tson FoUlldation on activities umelated ~o the purposes of the gift.

business wit? its ahunni, many of whom are concerned ~ Freeman ended his commentary by vvriti.ng,. "The next that what happened to the Robertsons coulq. happen to time a nonprofit executive js seized by .1J•al'cenous imthem .. Given the current state of its finances, Princeton pulse it may be necessary o1tly to whisper in his ear the must pel'suade the alumni to continue high levels of magic word, 'Princeton.'" financial support. The university's message thus redt!ces to something like this: "We did nothing i"irong and we I am co1ripletely sympathetic to Freeman's view of promise'11ot to do it again." Will it work? In time, I'm Princeton's malfeasance. However, I would note

· sure it will. Loyalties nin long and memories tend to that in reaching tl1e settlement Princeton adn1itted no fade. Will it work long-term? It's probably more likely wrongdoing. Indeed, princeton continues to denigrate that, a creneration hence, another generous family will the Robertsons-most receptly in a. leiter-to-the-editor have to ~·emind Prit1ceton of its obligations to donors. · fi·o111 a Princeton vice president appearing in the January

Mr. Piereson states, and Mr .. Eisenberg suggests, that fotmdations occasionally outlive their missions. That's quite ·ttue (though not as frequently true as grantees choose to believe). Ove1· til11e, missions a1·e accomplished m· in other ways rendered irrelevant. But that was not the case here. Through most of the Clinton administration, all of the Bush administration and into the early days of the Obama administration, the State Depatiment has pleaded for more language specialists, more regional experts, more professionals steeped it1 the 'culture of nations now emerging beyond Old Em·ope and the Anglosphere. It could be convincingly argued that the RobeliSOll mission is more i.mpmiant today than the day the first check was written.

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29 issue of The Chronicle of PhilanthT'opy. Moreove1·, the Robertson Foundation will be dissolved and the univel'sity will walk away with all but $100 million of the money. Freeman estimates that U11de1· Princeton's mismanagement the foundation cm1·ently has about

· $585 million.

Martlri Wooster, who. has written at length about the case fm: Capital Research Center (see CRC's web site at http://\:\l"\;vw.capitalresearoh.org/pubs/pdf/FW0506.pdf and chapter 2 of his CRC book, The Great P hilanthm· pists and the Problem of "Dono?" Intent"), wai11s that "universities min and will exploit every available loophole to divert a gift to causes they prefer." I can only advise that donorfi must sti.ll be very care:tl.ll in making gifts that will continue over decades.



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Freeman's Response to Scanlon

M. r. Scanlon's comments are noted with appreciation and with the exception that I wish my real~

~ime comments on the settlement, heat-of-battle stuff, had been more seemly. One more reason to thank the Bradley Center for this chance to consider the case in depth, and at some distance from the event.

Jack B. Siettel

From the Charity Gove7'nance Consulting LLC blog, online at http://www.chari0''tove7'nance.com. Reproduced with permissionfi'om Jack Siegel.

. . THE ROBERTSON FAMILY TAKES A PAGE OUT OF HJLLARY CLINTON'S PLAYBOOK Dateline: December 11, 2008, New York City

Wl).en we Ieamed yesterday from CNBC that the Robertson Family lawsuit against Princeton Uni

versity had settled, we jumped on a plane to the East Coast so that we could bask in the zeitgeist. Ou1· conclusion after learning the terms of the settlement: The Robertson Family took a page out of Hillary Clinton's playbook. First, spend a fortune kicking the something out of your opponent. Then, when· you lose, ask yom: opponent to reimburse you forth~ cost of breaking Jii.s face. That is the upshot ofv;rhat happened yesterday.

William Robertson and the otber plaintiffs agreed to drop their lawsuit. In exchange:

1. Princetonreimburses (over a3-yearperiond) the Banbury Fund for up to $40 million in.litigation costs. Tbe Banbury Fund is a tax-exempt foundation controlled by the Robe1tson Family that funded their side of the litigation. The reimbursement will be funded with money

. from the Robe1tson Foundation, the entity that currently supports the Woodrow Wilson School.

2. The Robertson Foundation will transfer $50 million ·to a :foundation to be cre~ted by the plaintiffs. The new charity's mission will be to prepare students for careers in govermnent service. The transfer will take place over a 1 0-year period.

3. The Robertson Foundation will be dissolved and its remaining assets will. be administered as a restricted en· dowment. That endowment was re.p01ted to be worth $900 million as of June 30~ 2008. Reports indicate that it is currently worth between $600 and $700 million.

Princeton University apparently incurred somewhere around $40 mil!! on in defense costs. Tbe university will be able to recover those costs :f:l:om the Robe1tson Founqation.

The attomey for the Robertsons, Ron Malone, told The Chronicle of Philanthropy (issue dated December 10, 2008) that the family settled because

Prh1ceton has a 1,000-year view of the Wo!'ld .... The family was facing spending th\l rest of theit lives liti· gating against Princeton and using up all the Banbury

· dollru·s to do that:

There is one problem with that l9gic: Prinpeton.presum~ · ably had that same world view back in 200'2 when the family filed the lawsuit. It was perfectly foreseeable that the litigation costs would be crushing. In that sense, the entire folly was irresponsible, particularly given some of the ~acts that have come Ol~t. ln particu1at:,. as· we recall the facts, the senior'Mr. Robertson was involved with the Robertson Foundation virhen some of the changes that his children objected to ;were made.

Vlhat is tmly galling about this settlement is that for $80 mHiion, we don't even get a judicial decision that advances the ball on such questions as donor standing. Vlhich leads to today's lessons:

A. h1stitutlons Should Keep Children OffBoards. Large colleges and other philant!u·opic organizations should fight like hell to convinc(;l donors that onc.e the donor is dead, other family members should have no input into how the money is administered.. It's one thing for donors to be on tl1e board of a supporting organization; it is quite another to have subsequent generations and their baggage on the board of the organization. The old adage holds: Children should be seen, but not heard. ·

B. Provide for Alt~rnative Dispnte R~solution. Botl1 the don\)1' and the institution should provide that any . .

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disputes over the administration of a restl'icted fund, including assessing donor intent, should be resolved through a private alternative dispute resolution process. The agreement should provide a time limit on the process and provide that no expenses will be reimbursed from the donated funds. It should also cap the expenses that both parties can spend on the process (with adjustments for infhition).

C. Legislatures Need to ClarifY Standing.· We need to move away :fi·mn revolving questions of standing under the common law. Anybody can file a lawsuit and then spend years arguing over whether they have standing. That becomes a bat'gaining chip, as we assume it was in this' case. We need clear statements from legislatures defi11ing when and who other than the state attorney general can challenge a charity's compliance with the tenns ofaresb:icted gift. The statutes also should provide clear rllles about how members of the public (including family members) can bring non-compliance to the attorney ge11eral's attention and how the attorney general should respond. Unce1tainty breeds this sort of Iftigation.

·The other two branches of govermpent fell way short in this case. ·The New Jersey Attorney General was missIng in action. It is the AG's responsibllity to intervene to

·protect charitable assets. Yet the record is devoid of any action by the New Jersey Attorney General. Separately, the court should not have allowed this case to drag on. The 350 pages in opinions from just over a year ago ftteled the litigation and the costs. A probate cotni is supposed to do equity, and one of its considerations should be to p1·event charitable assets from being frittered away. Coutis should stop indulging litigants in big-dollal' cases. Just because big dollars are involved doesn't mean justice can only be done by devoting years and tens of millions of dollars to the dispute.

D. Donms Should Check Their Egos. Donors should stop. telling institutions that they !mow more about running institutions than the professionals who run the institutions. Complex restrictions lead to waste. Times change. Donors, who will die, are simply unable to predict what life will be lilce 2 0 or 40 years after they are rotting in the ground. There is a reason for the rules against perpetuity. The dead should not control the future.

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To this end, serious consideration should be given to charging donors for the waste and inefficiency that re" stdcted gifts create. One approach would be change Section 170 and the correponding gift and estate tax provisions of the Intemal Revenue Code. Give a charity an unrestricted gift and you get a 100 percent deduction for the gift. Give a charity a restricted gift and you only get a 50 percent deduction. Economics would cure the arrogance of some large donors very quickly. Before the world goes ba!Ustic, we acknowledge that this proposal needs work, but at some point; we need to eliminate the wastefulness that results from trying to tie the hands of chariti~s that don't have the self-restrain~ to say ''no."

We are disgusted by William Robertson's sanctimonious statement rep01ted by The Chmnicle of Phtlanthropy (issue dated December 10, 2008):

This is a message to nonprofit orga.:nizations ofall kinds and throughout our country that donors expect. them .to· · abide by the terms of designated gifts or s~ffem the: consequences.

Ah) the grand crusade. As we read the outcome of this suit, Robertson achieved nothing except to waste somewhere around $80 milli01~ on Iav.ryers and the other costs of litigation. The $50 million that wiU go to the new. fotmdation Will be USed for plU"j)OSeS that strilce US as not all that much different than· they would have been had they remained at Princeton. We do have one bit of advice for Robertson and the universities that will apparently be the beneficiaries of the new charity: Don't . put your own children on the board.

.From· an. e-mail by Jack Siegel to FVtlliam. Schambra dated February 3, 2009: ·

I b ave been busy lately so haven't been able to go . tlu:ough my reoo1·ds, but the· question I think is fun

damental to the dispute is what decisions changing the mission did the senior Robertso11 participate in while he was still alive. My understanding and recol!ectiOJ1 is that the senior Robertson saw some of these changes in direction coming while he was alive, acquiesced, and didn't bring a suit. To me, if that is the case, it greatly undercuts the Robertson childre11's challenge. ·



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As food for thought, it is unclear why the conservative movement (which I often sympathize with) takes the side'ofthe donors' survivors in these cases. The movement is so worried about tort litigation and overzealous lawyers. The attomey general has standing to l'eprimand charities that don't follow donor restrictions. Once a membel' ofthe public (a survivor) brings an alleged departure fi:om restrictions to the attention of the AG, why should the survivors have further legal rights? I thought you guys were against private causes of action where · statutes don't specifically provide for them. Moreove1~ if conservatives truly bell eve in the sanctity of private property, why don't they i·ecognize that the property is no longe1· owned by donors or the survivors following a gift? It is owned by the charity subject to the purpose restrictions.

The fundamental problem in this enth·e area is the belief of donors that they can predict the fuhrre. If conservativestruly believe that the free flow of capital is a goqd thing, they should not be sanctioning policies that impede that flow. Co11servatives don't .lilce it when the government restl'icts the flow of capital. Why do they like it when dead people restrict the flow?

Donor restrictions that go on for decades are funda~11entally at odds with, the efficient flow of ·capita:! because they allow the dead to dictate the future. When I spealc to groups on this topic, I point out that when looking back, I recognize how different the world is today than when I was in high school in the early '70s. No computers, 110

Internet, four television stations, limited intemational travel, no CDs or DvDs, now dated medical procedures, no oil crisis, no developed India or China, strong labor unions, etc. Why. do 80-year o!ds believe they can predict the world's needs even 10 years after they are gone, let alone 40 or 50 given the changes tha~ have occurred ht the world while they W~?re alive? Why should we indulge their beliefthat they can predict the future with tax subsidies? I have to wonder: If the majority of colleges and unive1·sities were petceived as conservative, would the conservative movement be taking the side that it apparently takes in these disputes, particularly if the surviving children supported liberal causes? I suspect if he were alive, John Olin .would agree with me.

Freeman's Response to Siegel

I have been trying to convey a sense of what the Rcbertsons were up against in their contest with

Princeton. Mr. Siegel saves me further trouble. He reflects pitch-perfectly the attitude of many institutions toward their donors, which is: "Give us the check and then sit down and shut up." Vvheri the Robertson family rose to make the point, ·"Excuse me, sir, but we had an agreement-" they were pronounced contumacious. I don't kno~r if Mr. Siegel is serious when he St)ggests that .donors should be "charged for the waste and inefficienoythatrestrioted grants create,"buthe is saying aloud what many grantees murmur among themselves. Put aside the prudential question of whether nonprofit bt1reaucracies shot1ld be calling attention to "waste and ine:ffi.oiency"-thanks to the Rober'tsons, happy diys for Mr. Siegel are not yet here again.

Tim Walter

I met in conversation last year with,a group of about thirty fomtdation leaders in a wide-ranging dialogue

on topics incll:lding perpetuity, donor-intent ru1d mruldatory payout.'At a certahtpoint, the topic offuncjraising

. requests by university endowments came up and 'generated a surprising a:m.ol!nt of energy and ophrion-much of it suspicious and negative. Suffice to.say, it seems that there is a gap oftmst to be:bridged between university. leaders and experienced donors with regard to· gifts to endowments. Clarity of expectations and. clear commtl-nication .of results would certainly help. .

Freeman's Response to Walter

Anen, ~rother.

Martin Morse Wooster

N eal Freeman's insider's accotmt substantially, adds to our understanding of the motives and tactics the

Robertson family used in their lm:vsnit'. But as someone' who foJlowed the case more closely, perhaps, than any outside observer, I offer two comments· on the strengths

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and wealmesses of the Robertsons' case.

First, the Robertsons' strongest weapon was their forensic accmmting ofhow Princeton Universitymisused Ro bertsonFoundationmoney. They persuasively showed that Princeton was manipulating overhead charges and joint professo1·ships to divert a substantial amount of Robertson Foundation money away f1'otn the Woodrow Wilson School and towards projects that Princeton preferred. The report shows that universities· can and will use overhead charges to violate dono1· intent.

The weakest part of the Robertsons' case was the notion that Princeton was somehow at fault when students entered the Woodrow Wilson School, received their master's degrees in public policy, and then decided to pursue other careers. When, as happened at least once, a student entered the Woodrow Wilson School, re·ceived a master's degree, a'nd then decided to become a profesw sional oboist, the career change is not Princeton's fault.

One also wonders what sort of powers Priitceton 's Offi oe of Stewardship will have. The Robe1isons showed some smaller violations of donor intent by Princeton, most notably with a Danforth Foundation grant _for "religious work" that Princeton divetted into general qperating support. Will the Office of Stewardship be an accmmtability offic~ that will have the power to :fix donor intent violations? Or (as is more likely the case) will they be development officers with ne·w titles but not new responsibilities?

Princeton's triumph over the Robetison family remit1ds donors that they should be very careful in their gifts to higher education. Ptinceton~s misuse of Robertson Foundation money substantially weakens the bonds· of trust that universities ha.ve with their doriors, and should remind donors to exercise ca~ltion before entering into any agreements with universities.

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Freeman1s Response to Wooster

M r. Wooster's conunents are, as· always, hem·istic. His argument that Princeton is beyond criticism

when Wilson students "decide to pursue other careers" misses the point, bowevei', and I hope not intentionally so. Remember, Wilson is a professional school, designed to prepare young adults for a specific career. We're not talking about Catnp· Be· All· Ycu~Can-Be for waywru·d youth.

To shift the fl-ame of reference somewhat, suppose that ·students at Harvard Medical School began to show a mru•ked trend toward careers in architecture, 1·ather than medicine. Suppose, also, that the trend continued for many years and then accelerated, all with the clear if mostly tacit encouragement of the dean and his administration? Would donors to the medic,al school not have cause for alann? Would the govemi11g. board not have the right, indeed the responsibility,, to address. the situation? Would it be the right ootn·se for dny :responsible party to shrug his shoulders and say, "Hey, it's a·free co1.intry and we need architects and oboists every bit as much as we need doctors." No, the Wilson School produced so many investment bankers not because of . some spontaneous counseling riot 011 Career Day, but because the school made it kuo~l\'11. systematically that· ·would-be bankers would be warmly Vi'elcomed, that they would be appropriately tl'ai11ed and that they would be introduced to Wall Street recruitets h1 the most favorable · settings. A perfectly valid mission, most people would agree, It wasjust not the Robertsons'mission.

Mr. Wooster's characterizatio11 of the settlement as a ''tritm1ph" for P1'inceton leaves the flabber a mite gasted: I have had my say elsewhere on who won and who lost the case, but, even so, Mr. Wooster remh1ds us of what the rutcient warrior said to those congratulating hh11 011 his victory over the Roman legions: "One mme such victory and Pyrdms is undone.''

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EXHIBIT J

SPECIAL PROJECT FUND: AWARE


123

SPECIAL PROJECT FUND AGREEMENT

This Fund Agreement ("Agreement") is made by and between The Austin

Community Foundation for the Capital Area, a Texas non~profit corporation

(" ACF"), and the other undersign.ed parties hereto (''Donors/' whether one or

more).

WITNESSETH:

WHEREAS, the Don<?rs, in furtherance of the charitable purposes and

functions of the ACF, have determined that it would serve the :interests of the

Austin ~onun~ty to have a charitable and cb:ric improvement fund of the type:

herein created (the "Restricted Fund"); ru1.d

WHEREAS, ACF is a Texas corporation exempt from federal :income

taxation pursuant to Sections 501(c)(3) and ·170 (b)(l)(A)(vi)· of the Internru.

Revenue Code of 1986, as amended (the "Code"), and is an· appropriate

·community foundation within which to establish such a charitable and civic fund

for the purpose of serving the needs and intel:ests of the Austin community and

promoting the well--being of the people of Austin, Texas; and

WHEREAS, ACF is willing m'td able to accept the Restric.ted Fund,

subject to the terms m1.d conditions of this AgTeement;

NOW, THEREFORE, in consideration of the premises and the m~tual

covenarrts contained he1'ei11, the parties agree as follows.

1. NAME OF FUND. The name of the Fund created hereby is the AWARE

Furi.d (the "Fund") ..

--·-·----~·----· ----


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2.· PURPOSE OF THE FUND. The puipose of the Fund shall be to support

the activities of the Alzheiiner' s Association, Capital of Texas Chapter and other

Alzheimer's research and awareness activities in Texas.

3. INCORPORATION OF GOVERNING INSTRUMENTS OF THE.

FOUNDATION. ACF agrees to hold and adrnirri,ster all contributions to the

Fund under this Agteement, on the terrns and subject to the conditions set forth

in its (ACF's) governi11~ insb:uments, i.ncludil.1.g its articles of incorporation and

bylaws, as amended from time to time, and cmy resolutions and procedUl'es from

time to til.ne in effect. All provisions of such governing instruments of ACF and,.

such resolutions and procedures are il.1corporated into this Agreement m1xfby

this refe1;ence made a part hereof.

4. CONTRIBUTIONS. Any person or orgalli.zation may make a contribution to .

ACF for the purposes of the Fund by a trmLSfer of cash or ·other assets to ACF for

additions, in whole or in part, to the assets of the Fund. All c01'l:b:ibutions to the . .

Fund· shall be irrevocable and shall be used i:n furtherati.ce of the purposes of the

Fund.

5. · USE OF THE FUND. The Fund shall be classified as a" special project" and as

such, the income earned by the Fund shall belong to the ACF. The principal of

the Fund, from time to time, shall be co1nm.itted, gran.ted or expensed for, or il.1.

fmtherance of, the purpose o£ the Fund.

6. ADVISORY COMMITTEE. Fo1· purposes o£ this agreement, ____ ___,

_____ __, and ______ shall be the initial Advisory Con.unittee

2

-----~--------·-----·----·· ----


125

to the Foundation for the Fund. The Advisory Co:rrunittee may select additional

members or persons to replace the members of the Advisory Co:rnmittee who

1·esign, die or become incapacitated.

7. DISTRIBUTIONS. After taking into consideration any advice which may be

given from time to time by the Advisory. Co:rrunittee concerci11.g possible

distributions in .fmthe1·ance ?f the purposes of the Fund, ACF shall distribute

such amounts of the principal of t~e Fund as ACF, in its sole discretion, shall

determine from time to time.

8. TERMINATION. If (a) ACF should detenn.ine (in its ~ole discretion) that

continued compliance with the terms and provisions of this Agreement would be

impossible .or impractical or would be inconsistent with the charitable purposes

of the ACF, or (b) for any reason ·ACF dissolves, ceases to exist or ceases to hold

or adnunister the Fund or otherwise to function under this .Agreement, then the

net a~sets of the Fmid shall be distributed to one or more entities selected by ACF

which is (i) art organization exempt from taxation.under Section 501 (c). (3) of the

Code and (ii) not a private foundation under Section 509 (a) of the Code.

9. SEPARATE ACCOUNTING. The Fund shall be accounted for separately and

apart fwm other funds of ACF.

10. ACF AS OWNER OF THE FUND. The Fund shall be the property of ACF

and shall be owned by it.in its normal corporate capactty.

11. EXPENSES .. 1'he Fund shall bear (a:) its proportionate share of the fees of any

b:ustee, custodian or agent administer:ing assets of the Fund (whether such

3.


126

I trustee, custodian or agent be designated by ACF or by Donors)i ·(b) all expenses,

taxes Ol' other charges il1.curred by ACF il1. c01mection with the Fund; and (c) shall

pay a minimum fee of one huncll:ed dollru.·s ($100.00) ru.mually, which amount

shall be offs~t by all il1.come earned on the Fund and retail1.ed by ACF as

provided ill. Paragraph 5 above ..

12. LIABILITY OF ACF .. ACF shall il1.cur no liability to the Donors for ru.1.ytlung

done, or omitted, by ACF in connection with ACF's duties hereunder, except for

loss occasioned by th.e gross negligence or b;:td faith of ACF. The duties of ACF

shall be only those specifically set forth herein, or hereafter agreed to by it i11

V\rrilli1g. ACF is not aclli1.g as a trus~ee and there are rto attributes of a trust

inherent in the relationslup between the Dono:rs a:nd AC;F.

13. DEFINITIONS. For purposes of tlus Agreement, "charitable purposes"

mclude charitable, scientific, literary or educational purposes witlLin the meru.Ling

of Section 501(c)(3) .of the Code, contributions for which are deductible under

Section170(c)(2) of the Code. All references i11 tlus Agreement to the Code . .

include all applicable regulations promulgated by th.e Internal Revenue Service

under the Code.

4

. .. . ' ... .. --·-·· .. -··-·--- ---·-·------·~---"----"-


127

IN 'WITNESS VVHEREOF, ACF and the Dono1·s have caused this Agreement to be

executed as of the ___ day of _. ______ ___,.2005,


By:

Executive Director

DONORS

Name:------

Name:

Name: _____ _

Name: _____ _

Name:---..,-----

5

·I


128

EXHIBIT K

SPECIAL PROJECT FUND: AUSTIN HIGH SCHOOL 125th

ANNIVERSARY


129

THE AUSTIN HIGH 125TH ANNIVERSARY CELEBRATION FUND A SPECIAL PROJECT FUND OF


TI1e Austin High 125th Aruriversary Celebration Fund ("the Fund») was created by the donation of the property described on Exlribit A to The Austin Co:rrununity Foundation for the Capital Area ("the Foundation") in December, 2003. That contribution is to be held by the Foundation as a Special Project Fund and distributed by it subject to the tem1s of this Agreeme11t.

N arne. The name of the Fund is "The Austin High 125th Anniversary Celebration Fund". The Fund is created by alumni of Stephen F. Austin High School, Austin, Texas, ("Austin High") and parents of Austin High alU111n.i. ·

Purpose. The Fund's purpose is to make grants for the 125th anniversary celebJJaticin for Austin High. Aastin High is one of the oldest high schools west of the J:v.fississippi River in continuous operation. The 125th anniversary celebration will be a community event and celebration. At the conclusion of the Celebration any temaining assets of the Fund will be. gtanted to the Austin High Alumni Association (a special project fund of the Foundation) and ±he Austin High Endowment (a fund of the Foundation). Be?ause the amount of the net proceeds from the Celebration will not be known until after the Celebration, the amount granted to the AL1sti11 High Alunmi Association shall be an amount sufficient to fund the initial operation of the Association, including the creation Emd operation of the website, tht;J publication. of the newsletter~ for its first year, and the general expenses of the operatiol:). of the Association for its first year. The remaining net assets of the Fund shall be granted to the Endowment .. The Fund will cease operations with the gr~mts to the Association and the Endowment. . .

Advisory Comrill:l:tee. The initial Advisory Conunittee of the Fund· is· Melissa 0. Jackson and C. Stephen Saunders. ·The Committee may advise the Foundation on alllnatters related to the Fund. The Cmnroittee shall fowally adopt policies and procedures for advising the · Foundation on grants and bylaws for the govema.nce of the Conunittee.

Income. Income and pl'incipal of the Fund may be distl'ibuted and any ru.110U11t of the income of the Fund may be added to principal each year. In ru.w calendru.· year any am.ount or · all of the Fund's income earned in previous calendru.· years may· be distt{buted for the Fund's pm:poses. The Advis.ory Con:unittee may elect to' 1·ecommend that _grants be made of less than

·the income available for grru.1ts in any calendar yeru.· and the excess grru.1t money be held for distribution in subsequent years.

AHS !25th Celebration Spec. Project Fund. doc

_________ ,..,: __ • ..!..... ____ . __ ..:...~~-·---- ·--~····-- -- . . ·-""---------------~-'--'·-· ----~--~---------· -·


130

Other Ter:ms. The initial contributors to the Fund understand and agree that the· property donated to the Foundation and the income from it will be held and used subject to the following conditions: ·

a. All designated beneficiaries must either be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("the Code"), or constitute a governmental unit referred to 'in Section 170(c)(l) of the Code. With respect" to any distributions from the Fund which are to be made for a designated purpose, that purpose must be within the scope of the tax . exem:pt purposes of the Foundation.

b. Funds may be co:tn1u.ingled by the Foundation's. Fiscal Trustees with other similar funds for investing and accounting.

c. At some time in the future the Foundation's Board of Governors may determine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this Agreement is mmecessary, · impractical, or impossible, or that the Agreement is not consistent with. the· tax exempt purposes of the Foundation. In that case, the Foundation's Board of

. Governors may order any variance from the Agreement and that application of the whole or any part of the pri11cipal or income of the Fund to other charitable or educational purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as feasible, the intents and purposes of this Agreement.

d. Determinatio11 of what constitutes "income" for purpo·ses of distribution shall be · reasonably determined by the Founqation and/or the Treasury Department's

Intemal Revenue Service Regulations. · ·

e. The Foundation's acceptance of this Agreem.ent; so far\ as pemutted by law, shall constitute its agreement to hold, manage, and distribute the donatimi. as set out above. ·

f. Provisions of the Foundation's .Alticles of Incorporation as on file in the office of the Secretary of State, along with the Foundation'·S Bylaws, as amended, shall be followed ill canying out tins Agreement.

Executed to be effective January 1, 2005.

AHS !25th Celebratiou Spec, Project Fund.doc - 2 "•


131

The Austin High 125111 Anniversary Celebration Fund

Melissa 0. Jackson, co-Chair C. Stephen Saunders, co-Chair


by:·------~-----------Richard G. Slaughter, . Executive Director

AHS !25th Celeb111tio11 Spec, ProjeotFund.doc - 3 -


132

EXHIBIT A

THE AUSTIN HIGH 125TR ANNIVERSARY CELEBRATION FUND A SPECIAL PROJECT FUND OF

THE AUST~ COMMUNITY FOUNDATION FOR THE CAPITAL AREA

A check in the amount of $10,000.00.

AHS 125th Celebmtion Spec. Project F~11d.doc "4-

--~----~---·-·--·


133

EXHIBIT L

SPECIAL PROJECT FUND: AUSTIN HIGH SCHOOL ALUMNI

ASSOCIATION


134

THE AUSTIN ffiGH ALUMNI ASSOCIATION A SPECIAL PROJECT FUND OF

THE AUSTIN COMMUNITY FOUNDATION FOR TRE CAPITAL AREA

The Austin High Alumni Associai-i.on (the "Fund") was created on October 21, 2006. The Fund is held by the Austin Community Foundation for the Capital Area ("the Foundation") as a Special Project Fund and its assets shall be distributed by it subject to the terms of this Agreement.

(

Name. · The name of the Fund is "The Austin High Alumni Association>~. The Fund is~d by alumni of Stephen F. Austin High School, Austin, Texas, ("Austin High") and parents of Austill High alumni. The hlltial contribution of $10,000.00 is a contribution from the Austin High 125th Anniversary Celebration, a special project fund of the Foundation. .

Purpose. The pm:pose of the Fund is to support Austin High. Austill High is· one of the oldest public high schools in continuous operation west of the Mississippi River. The. Fund shall serve to keep Austill High's alunmi and friends i) informed on matters related to the school, ii) connected to the school and its rich history, and iii) informed on ways to contribute to educational ~d extracurricular ~xcellence at the school.

Advisorv Committee. The initial. Advisory Committee of the Fund is Rita I<reisle, Tudey Teten, Jeff Gray, Melissa J aci).cson, Wroe Jackson, Greg Tailey, Stephen Erikson, Lindsay Langley Sartin, Delano Womack, Bi'Ooks Goldsmith, Julie F. Sayers and Scott p; Sayers, Jr. The Committee may advise the Foundation on all matters related to the Fund. The Committee shall fo11nally adopt bylaws fov the governance ·of the_ Committee. ·

Income. · Income and principal of the Fund may be distrib:uted and any a:mom1t of ' the inco~e of the Fund may be added to,principal each year. Tn any calendar year any amount or all of the Fund's mcmt1e eamed in previous calendar years may be distributed for tl!e Fund's purposes, The Advisory Committee may elect to reconunend that grants be made ofless than the income available for grants in any calendar ·year and tl1e ·excess grant money be held for distribution h1 subsequent years.

Other Terms. The initial contributor to the Fu11d understands and agrees that the . property donated to the Foundation a:n.d the :income from it will be held a:n.d used subject to the following conditions:

G:\CSS\Austin HiglJ\AHS Alwnni Fund\AHS Alumni Sp_ec. Proj. Fund. doc·, 1 -


135

a. All designated beneficiaries must either be exempt fi·om federal income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("the Code"), or constitute a governmental unit referred to in Section 170(c)(l) of the Code, With respect to any distributions from the Fund which are to be made for a designated purpose, that put'pose must be within the scope of the tax exempt pU1.1Joses of the Foundation.


c. At some time in the future the Foundation's Board of Governors may determine · that due to· conditions or ~ircmnstances which have changed since the execution

of this Agreement, literal compliance with this Agreement is um1.ecessary, impractical, or impossible, or that the Agreement is not consistent' with the tax exempt purposes of the FoundatiOl'i. In that case, the Foundation's B'oatd of Governors may order any variance from the Agreement and that application of the. whole or any part of the principal or income of the Fund to other charitable or educational purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragl'aph shall follow, as nearly as feasible, the. intents . and purposes oft~s Agl'eement.

d. Determination of what constitutes "income" for purooses of distribution shall be reasonably detennined by the Foundation and/or the Treasury Department's Intemal Revenue Service Regulations. ·

e. The Foundation's acceptance of this Agl'eement, so far as permitted by law,. shall constitute its agreement to hold, manage, and distribute the donation as set ~~~ .

f. Provisions of the Foundation's Articles ofincorporation.as oh file in the office of the Secretary of State, along with the Foundation's Bylaws, as amended, shall be followed in carrying out this Agree1nent. · ·

Executed to be effective October 21, ~006.

The Austin High Alu!IDrl Association

Julie F. Sayers Scott P. Sayers, Jr.

· 0:\CSS\Austin High\AHS Alu1~i Fund\ARS Alumni Spec, Pmj. Fund.doc~ 2 ~


136

Rita Kreisle Tudey Teten

Jeff Gray Melissa Jackson

Wroe J aclcson Greg Talley

Stephen Erikson Lindsay Langley Sartin.

Delano Womack Brooks Goldsmith

The Austin High 125th Annive1·sary Celebratio~ Fund

Melissa 0. Jackson, co-Chair · C. Stephen Saunders, co-Chair

Austin Community Foundation for the 'capital Area ·

by:. ___________________ _

Richard G. Slaughter, Executive Du:ector

G:\CSS\Austin High\ABS Alumni Fund\ABS Alumlli Spec. Proj. Fund.doc· 3 •

.. ..... -.,_.,.--:··.-..,..--~ .. """:'.-.-------.,..--.-. -. :.-:----:-·.--·. -. ~-=-·-:--.... ----. ---~.-·---~.·-. -:-··:··-~-.----.. ·-:--~·-·-':""""·.--

.................. -------··---·-··----------·----


137

EXHIBIT A

THE AUSTIN HIGH ALUMNI ASSOCIATION A SPECIAL PROJECT FUND OF


A check in the amount of$. ____ _

G:\CSS\Austin High\AHS Aluroui Fund\AHS Alumni Spec. Proj. Fund.doo• 4 -

~~~-.· 7-. - ... -.-.---. ---. -··· ... --.--. -.... - ... -:--.-. - .. -.. --·


138

EXHIBIT M

SPECIAL PROJECT FUND: STEPHEN F. AUSTIN SOCIETY


139

.. ~·

. THE STEPHEN F. AUSTIN SOCIETY A DONOR ADVISED FUND OF


·The Stephen F. Austin Society ("the Sooiety11) was· created by the donation of the

property. described on Exhibit A to The Austin Community Foundation for the Capital Area ("the Foundation") on rurie 1, 2002. That contribution is to be held by the Foundation as a Donor Advised Fund and distributed by it subject to the terms of this Agreement.

Name. Tpe name of the Fund is "The Stephen F. Austin Society". The Society is created by alumni of Stephen F. Austin High School, Austip, Texas, (11Austin High") and parents of graduates of Austin High. ·

Purpose. The Soci~ty's purpose is to make grants for· the enrich~ent of extracurricular activities at Austin High. Those grants shall be made on the written advice of ¢e Advisory Committee and the grant funds shall be delivered tci the Excellence Fund Committee oftheAustinHigh Parent Teacher Student Association with specific directions for · their distribution.

Advisory Committee. The initial Advisory Committee of the Society is Deborah S. Hanna, S.cott P. Sayers, Jr., Lauren Granger Hall, ~nd C. Stephen Saunders. The Committee shall advise the Foundation on grants to be made from the Society. The Comnrlttee shal) formally adopt policies and procedures for grants and bylaws for the governance of the Committee.

Incom...§. Income and principal of the Society may be distributed and any a:triount .of the income of the. Society may be added to principal each year. In any caiendaryear any amount or all of the Socie7ty' s income earned in previous calendar years may be distributed for the Society' spurposes. The· Advisory Con1rnittee may elect to r.ecommend that grants be made of less than the income available for grants in any calendar year and the excess grant money be . held for distribution in subsequent years .

. · Other Terms. The initial con:tributors to the Society understand and agree that the property donated to the FouJ:!dation and the income from it will be held and used subject to the following conditions; · ·

a. All designated beneficiaries must either be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986,,as amended (11 the Code"), or constitute a govemmental unit referred to in Section 170(c)(l) of the Code. With r~spect to any distributions from the.

1\SERVERO~\Dnin\Cjc\Foun\Stophon F. Austin Soc. Don. Adv. Fund.wpd ~ 1-


140

, . ..

/ .. Society which are to be made for a designated purpose, that purpose must be within the scope of the tax exempt purposes of the Foundation:

b. Funds maybe commingled by the Foundation's Fiscal Trustees with other similar funds for investing and accounting.

c. At some time in the future ·the FouiJdation's Board of Governors may determine that due to conditions or circumstances which have changed since the execution of this Agreement, literal compliance with this" Agreement is unnecessary, impractical, or impossible, or that the Agreement is not consistent with the tax exempt purposes of the. Foundation. In that case, theFoundat~on's Board of Governors may order any variance from the Agreement and that FJ.pplication of the whole or any part of the principal or income of the Society to other charitable or educational purposes, as it deems appropriate in its judgment. Any change made pursuant to this paragraph shall follow, as nearly as feasible, the intents and purposes of this Agreement.

d. Detenni.tiation of what c-onstitutes· 11incm~e 11 for purposes of distribution shall be reasonably determined by the Foundation and/or the Treasury Department's Internal Revenue Service Regulations.

e. The Foundation1s acceptanc'e of this Agreement, so far as permitted by law, shall constitute its agreement to' hold, manage, and distribute, the. donation as set out above.

f. Provisions of the Fou~dation' s Articles of Incorporation as on file in the office of th~ Secretary of State, along with thS\ Foundation's Bylaws, as 'amended; shall be folloY7ed in carrying out this Agreement. .

g. The members of the Advisory Committee to the Society acknowledge that they have been furnished with the written g1;1idelines of the Foundation

. relative to "Donor Advi.sed Funds II and they agree that the guidelines will be followed with respect to the Society.

Executed to be f)ffective June 1, 2002.

\\SEIWER02\Dnln\Cjc\Foun\Slcphen F. Austin Soc. Pon. Adv. Fund,wpd :-2-

· .. ·

.... ·-·----~---~-- ---·---.. --.. ·-···---------·-··-"·--··-"··-··-"·-·-----~------------------·


141

\\SERVER021Dntn\Cjc\Foun\Stcp1Jco F. Au51ln S~c. bon. Ad1•, Fund.wpd -3-

~~k Lauren (]ra,nger Hall


by!' l{._:;_ct _a_~_;_-,_G-.____:,J __ , 2002

·-------·----


142

EXBIBIT A.

THE STEPHEN F. A DSTIN SOCIETY A DONOR 'ADVISED FUND OF


A check in the amount of $1,000.00 dated July 17, 2002.

1\SEltVEROZ\Dalli\Cjc\Foun\S<ophen F.Auslin Soc. Don. Adv. Fund.wpd .. -4-

··--··----·---------- ~-~- ---·----------·----·-····-··-- .


143

EXHIBIT N

COMMUNITY FOUNDATION RESOURCES


144

COlY.IMDNITY FOUNDATION RESOURCES

a. Council on Founqations: http://-vvw1:v.cof.org/

b. Communityfoundations.net

c. The Princeton v. Robertson Case: Too Big to be Left to the Lawyers The Hudson Institute: http:/ /pcr.hudson. org/index. cfm ?fuseaotion:=:public_ation. details&id==60 18

d. New York Times Orphan Tntst artiole:http://Virww.nytimes.com/2007/09/29/us/28cnd· foundation.html? F 1 &emc=etal

----------~---··--------·-·-·---______ , __ ,...___ ···--~

- ----~ -------~-·----· ______ ____..~-----------·-~-----~----~------ ·- -- ... ~--·--------------- ~----- ----~-·~-----


145

EXHIBIT 0

SAMPLE BEQUEST WORDING


146

Appendix 1: Sample Bequest Wording

Charitable Bequests Unrestricted bequests are preferred since the funds may be used where most needed. However, bequests may be restricted for specific areas of our work such as r~search or programs. Bequests restricted to a particular geographic location are discouraged. For assistance, call the Regional Planned Giving Office listed on page A-5-1.

SPECIFIC BEQUEST

'1 f}re and kqUfJ:tJh to the Arthritis Famdation, Inc, Texas Chapter (or to the Arthritis F atndat:iof; Inc, a Georgja corpar~, the sum if $ to ba used for the [pleral fJUrJX$es if the F oundat:ion. "

· PERCENTAGE BEQUEST

"I f}w and kqueath to the Arthritis Foundation, Inc, Texas Chapter (or to the Arthmis Fatndation, Inc, a Geoiyja corparati1lr!), % if ?'0' estate to l:e used for the gmeral -purposes if the· F otmdat:i.on. " . .

RESIDUARY BEQUEST

'1 gi:ce and kqueath to the Arthritis F ounch,~ Inc, T~as CJJapter (or to the Arthritis Foundation, Inc,· a GeoPia· C(Jiporatim), the nst; nsidue and remtinder if my estate to ba used for the JP~fffal purf,X$es if the F ownc!tuion. " . ·

CONTINGENT BEQUEST

. '1n the ecent that any if the abow namd bm::fo:iaries shall not sura'w 111!, or shall die du:ring the adninistration if my t;State, Wthin ninety (90) r:b;;s from the date if my dw:h, or as a nsult if a a:mmn disaster, then. I g)w and kqueath that ~ary's sh;re rf my estate to the Arthritis FoundatWn, Inc, Texas Chapter (or to the Arthritis Fountlatian, Inc, a Georgja rorporation), to ba used for the [FIBml

-purposes if the Fatndation."

RESTRICTED BEQUEST

1'1 f§W and kqueath to the Arthritis Fowndat:ion, Inc, Texas Chapter (or to the Arthritis Foundation, Inc, a Georgia corpora~, %if my estate to be used wfimd an Arthritis Foundation mearrh ~ant £n rrerrmy if rfD1 sister, "

Advisor's Notebook @ 2003 Arthrltls Foundation. All rights reserved.


147

Testamentary Gift Annuity While the sample may be useful in tmderstand:ing the general framework of the necessary wording, we- recommend contacting the Regional Planned Giving Office listed on page A-5-

. 1 for assistance during the actual drafting process. An illustration may be prepared showing approximately how much the future fixed payments will be based on the funding amount the testator has in mind

"! gjw ro the Arthritis :Founrlatiorl, a Gex;rgia OYt'fXJ'tatim loztted in A tlarJta, GemWa {lxreinafter caJkd . 'tk Arthritis F oundationJ . % if my miduary e;t£tte for its g;mral fJUt1X»r5, prodded that the Arthritis Foundation shall pay a om-life gift annuity ro my brother, . 7ihc5e birthdate is , and a swnd one-life gift annuity ro my other ~

, 7ihaie birtbdate is • The rate to .,_k__,.,id,...,...by-the,..-A--,--,rthritis'""""'-:-. =pount/a-.~ti<rn.~on each gift annuity uill!:e deternined by the Arthritis Famdati<rn.~ ;(annuity rate table m ejfott on the date if my rlMth for the birthclates indicated herem. The gift annuity agrr?erJEr!lS Wll k equally fonded at my death and shall k irrmtli4te pct;rmnt gift annuit:Us. The gift al1r!Uiry agreemmts shall k nonassignable. P«ynr:nts are w k mtde quartei/:y and shadd end W:th the paymmt next pmxling the dRath rf the annuitant. It is my interrtion ro rrnke a <haritab!e gift to the Arthritis Foundation, and ro proride a gift annuity for and a second gift annuity fat -~--· If. dee> not surdw m; I giw the portion if % if my residuary e;tate that 'OOUid haw lwz used to fond his gift annuity, to the Arthritis Foundation for its gmeral ~e;. If . ekes m suni.w m; I giw the portion if · % if my residuary e;t4te 1ihidJ WJU1d haw been used w fond his gift annuity, to the Arthritis Foundation for its general j:itfrjx£6. " .

----------:-:-:--:--::-:-:-----:----------- A-1·2 Advisor's Notebook

© 2003 Arthritis Foundation. All rights reserved.

________ ,. __ , _____ --


148

PROVISION IN WILL USING AUSTIN COMMUNITY FOUNDATION

(c) FINAL CONTINGENT BENEFICIARY: When property is to be distributed as provided in this subparagt~aph (c) it shall be distributed to The Austin Community Foundation for the Capital Area (the "Foundation"), a Texas non-profit Corporation with offices in Austin, Texas, to be added to the principal Donor Advised Fund created by my wife and me lmown. as The Family Fund for use for its charitable purposes. If that fund is not in existence at my death then this gift to the Foundation is made for the following purposes, and an advisory conunittee shall be appointed consisting of the individuals named below, to be operated on the following terms: ·

Name:

The gift shall be known as The ____ Family Fund (thy "Fund").

Endowment:

Except as provided below, the Fund shall be a permanent endowment. of;'the Foundation. The Foundation may distribute any amount up to five percent (5%)' of the value of the Fund in any calendar year ("the distributable amount"). The value of the fund determined for the purpose of establishing the distributable amount shall be determined on the same date each year, unless the governing .body of the Foundation detennines that it is in the Fund's best interest to change the date. The Advisory Committee may elect to recommend that grants be made of less than the distributable amount and the excess grant money be held for distribut~on in subsequent years. In any calendar year any amount or all of the Fund's distributable amount from previous calendar years may be distributed for the Fund's purposes.

Purposes:

The Fund's primary purpose is to provide grants to be made in the Austin, Texas area. Grants shall be made fm; charitable, educational, or religious purposes.

I fully recognize that the purposes stated are very broad and general and open to substantial discussion about how to best meet them. I have intentionally stated those purposes in very genera1 tenus because I recognize that the Foundation and the Fund may be acting to implement those purposes many, if not hundreds, of years from now. The statement of those pmposes accurately reflects my goals for the use of the income from the Fund. I am .confident that regardless of the state of the country at any time in the future, there will always be a substantial need for charitable funds for the purposes of the Fund.

G:\CSS\SEMINAR\Docs for Adv. Courso.doc

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149

Advisory Committee:

The Foundation shall always be advised on grants to be made by the Fund by an advisory committee (the "Advisory Committee"). The initial Advisory Committee shall consist of my children who shall serve beginning at age twenty~one (21). Until one (1) of my children is age twenty-one (21) no distributions shall be made from the Fund. If at any time none of my descendants is living, the goveming body of the Foundation shall make the grants from the fund.

The Advisory Committee shall always have at least two (2) members anq the Committee may add as many additional members as it deems appropriate. The Advisory Committee members shall replace any member who fails, ceases, or refuses to serve by majority vote of the members then serving. The members shall serve without compensation, but may be reimbursed for expenses reasonably incurred by them in the performance of their duties. Reimbursement of expenses shall be in the discretion of the Foundation. It is my strong hope that the Advisory Cormnittee will fill vacancies and additional places in the Connnittee with my descendants, if possible.

I recognize that the advice of the Advisory Committee shall not'· be bincling on. the Foundation. I am confident that they will be diligent in seeking, receiving, investigating,. and· researching excellent opportunities for grants from the Fund for its purposes. Because their advice is not binding on the Foundation, the members shall have no liability to the Foundation or any other person or entity for their action or in~ction as members o~the Advisory Committee. ·

The Advisory Committee may adopt rules. for its govemance and amend them as it deems appropriate from time to tini.e. I direct that the Advisory Committee meet at

· least quarterly to consider and act on its business. I direct the Advisory Committee to stay in regular contact with the Foundationls goveming body and Executive Director. The Advisory Committee's recommendations for grants to be made from the Fund shall always be in .writing and may, in addition, be made orally in meetings with the appropriate committee or other appointed body of the Foundation. ·

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