Frequently Asked Questions
GENERAL
An investment fund set up by an institution in which regular withdrawals from the invested capital and income are used for specified purposes. Endowment funds are often used by nonprofits, universities, hospitals and churches. They are funded by donations which are tax deductible for donors and are intended to exist and retain a grant making capability in perpetuity.
Yes. DHPCF has been approved by the State of AZ as a nonprofit corporation and the US Internal Revenue Service as a tax exempt, tax deductable organization under IRS Sec. 501c)3).
Basically, the church and the foundation are separate entities in that each is an independent stand-alone nonprofit corporation with separate and non overlapping management. However, the foundation bylaws state that all grants from the foundation will be used solely to support DHPC and to further the mission of the church; and that the specific use of these grants will be determined by DHPC Session subject to discussion and agreement by the DHPCF board that the grant complies with DHPCF policies and the requirements of Sec. 501 c)3) of the IRS code regulating nonprofits.
Session approved $10,000 for the legal costs of setting up the nonprofit foundation and obtaining IRS approval which has proved to be adequate. Session has since approved some additional funds to be used for the promotion of the endowment fund and to inform members and friends of DHPC as to how it may be used for both the benefit of DHPC and the donor. At a point in the future when the fund has grown to adequate size, the DHPCF board will take over the responsibility for meeting the expenses of the Foundation.
FOUNDATION GOVERNANCE
The DHPC nominating committee proposed several names for position of Director on the board and the congregation elected them. Once established, the board chose their own officers. Prior to the election a committee existed that worked for many months to research, design and implement an endowment foundation for DHPC. All of the current board members had served on that committee in addition to other church members.
As the bylaws state “the Board shall have general charge of the affairs, property and assets of the Foundation … (and the Responsibility) to carry out the aims of the Foundation.” In short, the Board runs the Foundation in accordance with the bylaws and Sec. 501c)3) of the IRS code and regularly communicates with the Session and the congregation regarding fund activities and investment results. Each year the Board reviews its policies on Donations, Spending and Investment.
There will probably be some openings on the board every year. If you are interested, contact a board member, including Pastor Jim, or a member of the DHPC nominating committee.
INVESTMENT OF THE FOUNDATION FUNDS
The Board has set up an arrangement with the Arizona Community Foundation to accept funds as they come in, invest those funds and provide a regular accounting to the Board. The agreement allows DHPCF to withdraw any and all funds whenever the Board might so choose. Once the fund has earned enough money in order to make grants, ACF will transfer the necessary money and DHPCF will issue checks as required. For more information about ACF see their website at www.azfoundation.org.
The cost of their fund management is based on the dollar value of the funds they manage. So, right now there is no cost because the endowment has no funds. Once the endowment starts receiving donations, the cost will be approximately 1 ½% of the asset value of the fund.
DONATIONS
Funding for the endowment will come from various assets (cash, stock, bonds, life insurance, testamentary bequests, etc) donated by members and friends of DHPC.
Generally speaking, DHPCF can accept any valuable asset so long as it would not affect the nonprofit status of the endowment. So, cash, stocks, bonds, land, houses, jewelry, vehicles, livestock, annuities, life insurance, etc. can all be donated or bequeathed to the fund. However, everything on the above list would have to be sold within a reasonable time so the fund would not be taking the risk of a drop in value. Also, items other than cash, stock, and bonds would involve additional cost to the fund for appraisals, short term maintenance, etc. which the donor would be expected to pay. Thirdly, the board may refuse a gift if it might entail some potential liability for the board or the church, or could interfere with DHPC’s pursuit of its mission or for other good in the Board’s sole discretion. If you are interested in donating items other than cash, stocks and bonds it is highly recommended that you talk with a member of the foundation board before completing that transaction.
Generally speaking the answer is “yes.” However, if you have any questions about deductibility or have an unusual tax or financial situation, you should talk with your tax advisor prior to making the donation.
Yes. Arizona is very flexible regarding gifts by will (often called legacy, testamentary gifts or bequeaths). Such gifts can be made as simply as using a hand written will (called holographic will)or as involved as a video presentation by the donor. But, even with that flexibility, mistakes or misunderstandings can occur. The board can make available language that can be included in your will to accomplish whatever your desires might be. Also, to facilitate the Church’s long range financial planning, the board would ask that they be made aware of gifts planned for the future.
Yes. Any board member would be pleased to talk with you regarding any donation you might be considering.
Because no one knows what needs or opportunities may arise in the future, the board’s preference would be that all gifts would be for general use. However, the board recognizes that some donors will want to support a particular activity with their gift such as music, children’s programs, Christian education, etc. so it is possible to restrict your donation through the use of more specific funds.
The funds are:
- General – distributions from this endowment fund will be applied at the discretion of Session to those areas which can contribute most to the accomplishment of the mission of DHPC;
- Special Purpose Funds – These funds are not endowment funds and may be spent on any amount needed up to 100% of the fund.
- Children and Youth – Distributions from this fund will be used for the creation of programs designed to attract young people to the Church, to provide them with Christian education and to help them develop into upstanding Christian adults;
- Local Mission and Outreach – Distributions from this fund will be utilized to identify human needs and to create programs that meet un-served needs in the community such as hunger, homelessness, familial abuse, medical/psychological counseling and substance abuse.
- Music, Arts and Worship Activities – Distributions from this fund will be used to develop programs that will enhance the worship experience at DHPC such as art, music, drama, etc.
- New Communities of Faith – Distributions from this fund will be used to expand Christian opportunities outside DHPC such as Church startups, community worship activities, acceptance and education of foreign residents, etc.
For more detail on any of these funds or should you desire some additional restriction on your gift, please contact a member of the Board.
Money in the endowment fund will generally not be used to provide operating or capital funds for the church – they are intended to support the longer range mission of DHPC and not be available for operating or capital needs. If a choice must be made between endowment donations and capital/operating needs the board would ask that preference be given to meeting the everyday expenses of running the church and retiring mortgages.
No. Gifts to the foundation are irrevocable.
GRANTS FROM THE FUND
Currently, target initiatives which Session may choose to fund from the General Endowment Fund would include:
- New Ministry Initiatives – Expansion of DHPC’s ministries of education, worship and music; the nurturing of children and youth; and faith formation for all ages
- Missions – New missions, evangelism and community services locally, nationally and internationally.
- Special Programs – Development and start-up of new programs or special events designed to expand Church membership and attendance and provide leadership development.
As needs and opportunities occur, this list may be expanded by the board and/or Session.
The process for the determination of a grant from the endowment fund is:
- Annually, the board will determine how much money is available for a grant(s) and will inform Session of the amount to be given.
- Session will review suggestions for using the grant and will select one or more for that year.
- These selections will be reviewed with the board so as to ensure they fall within the mission of DHPCF and will not harm its status as a nonprofit corporation.
The fund cannot make grants until the total asset value of the foundation exceeds $200,000. If at some point after that, the fund falls below $200,000, grants may still be made if the board feels they are appropriate.
There is no hard and fast rule regarding the size of grants that may be made. The board is required to look at the total amount of money available, the state of the economy, the need being addressed, etc. Generally, once the endowment is sufficiently funded the board expects to make grants around 5% of the asset value of the fund. Grants from the Special Funds may exceed this.