Organizations can make a lasting impact
November 26, 2012
For people looking to make a positive longtime impact on their community, charity or civic group, they can establish their own foundation or contribute to an existing one. A foundation is a nonprofit corporation or a charitable trust that makes grants to organizations, institutions or individuals for scientific, educational, cultural, religious or other charitable purposes. There are two basic foundation types: public charities and private foundations. A public charity get its funding from diverse sources, which may include foundations, individuals and government agencies. A private foundation receives its donations from a family, a person or a corporation. There are three designations of private foundations: private endowed foundation, pass-through foundation and private operating foundation. A private endowed foundation is created from donated money that is invested and the income is paid out annually to a designated charity. Generally, the principle or endowment is not spent, only the investment income. A pass-through foundation is a private grant making organization that distributes all of the contributions it receives. A private operating foundation uses the bulk of its income to actively run its own charitable programs or services. Examples include a library, a historic property or a museum. Some private operating foundations also choose to make grants to other charitable organizations. All tax exempt organizations submit annual filings to the Internal Revenue Service. These filings are public and include information about an organization’s finances, board members and key employees. Private foundations must list all grants paid that year. Some public foundations will list their grants voluntarily. Bruce Mazzoni, who helped establish the Cranberry Legacy Endowment in November 2009, said it was a nine-month process deciding how to set up the foundation that helps civic and nonprofit groups in the community. The Cranberry Legacy Endowment is managed by volunteers from nonprofit and civic groups. Since Legacy Endowment’s inception, more than a dozen legacy endowments have been created under it to benefit specific nonprofit and civic organizations in Cranberry Township. In a little more than three years of existence, the Legacy Endowment already has about $1 million in endowments that benefits organizations such as the Cranberry Public Library and the township’s parks. The Legacy Endowment has no paid staff. Its board is comprised of community members who volunteer. To manage a wide range of options for endowments and endowment investments while keeping the costs down, Mazzoni said it uses the administrative services of the Pittsburgh Foundation. If the board members did the financial and tax administration, the cost Mazzoni estimated would be “at least five figures annually.” Established in 1945, The Pittsburgh Foundation is one of the nation’s oldest community foundations and is the 15th largest of more than 700 community foundations across the United States. The Pittsburgh Foundation’s services include tax reporting for more than 1,000 funds like the Cranberry Legacy Endowment and the Butler County Endowment Fund. “The Pittsburgh Foundation handles all of our administration and tax filing,” said Mazzoni, adding the administration costs are less than 1 percent. The typical annual grant payout from the endowments is about 4 percent. “The endowment helps family leave a legacy through their wills and other means that will last a lifetime,” said Mazzoni. Mary Lee Gannon, president of the St. Margaret Foundation, a charitable trust for UPMC St. Margaret Hospital and a member of Pittsburgh Planned Giving Council, said the St. Margaret Foundation was set up in 1986 to help preserve the assets of the community hospital. The Pittsburgh Planned Giving Council is a group of professionals committed to promoting gifts to charities as a way to achieve individual estate planning objectives through education. The St. Margaret Foundation was changed in recent years from a private foundation to a public charity so it could seek donations from outside sources to help it provide health care services to underserved people, she said. Because it is a public charity, it receives the financial support of both the corporate community and individual contributions. “We have a very well balanced mix of support, but the need is so great,” said Gannon. Legacy giving has a major impact nationally as well as locally. Nearly $50 billion in grants is dispersed annually across the U.S. through individual and corporate donations. The Foundation Center, based in New York City, which provides information about philanthropy worldwide, found that corporate foundation giving grew fastest in 2011, increasing 6 percent while community foundation giving remained basically unchanged. “Community foundations showed the fastest growth in foundation giving for many years,” said Steven Lawrence, director of research at the Foundation Center. “But, in the aftermath of the economic crisis, it has been corporate foundations that have rebounded most quickly.” Giving by U.S. foundations totaled an estimated $46.9 billion in 2011, surpassing the $46.8 billion pre-recession peak recorded in 2008. Yet, after accounting for inflation, contributions by the nation’s more than 76,600 foundations were down slightly from 2010, according to estimates by the Foundation Center. The survey findings also suggest that 2012 foundation giving will grow 1 to 3 percent overall. With inflation averaging just less than 3 percent, this suggests it will remain unchanged at best based on real purchasing power.