FAQs for Donors
Private individuals ("Donors") are encouraged to set up a "Named Fund" which is held and managed (like a sub-trust) as an "endowment fund" by the Foundation. Once the Fund is established, the Donor is encouraged to make donations to the Fund. These may be made during the Donor's lifetime (in which case there are income tax benefits to the Donor) or upon the Donor's death (i.e. under the Donor's Will).
Other options are available, if a donor is not able to reach the threshold for a Named Fund, including contributing to a “Community Group Fund” or the “General Endowment Fund”.
All money given to Endowment Funds by the Donor is invested by the Foundation, and each year the foundation distributes income earned from the Fund to the community; i.e. With Endowment Funds, the capital is invested in perpetuity - "the gift that keeps on giving".
This is entirely up to the Donor who sets up the Fund. The Donor may specify particular charities (or more general charitable purposes) to receive the annual distributions; or the Donor may leave the gift "unrestricted" so that the Foundation decides where the money is most needed each year.
Many Donors choose both - they specify a certain percentage of the distribution to go to particular charitable purposes and leave the balance unrestricted. Donors may choose to leave a specific sum, or a percentage of their estate, to the Foundation.
Manages each Fund
Each Fund is separately monitored and accounted for. The capital of each Fund is combined with all other Funds (to achieve economies of scale) and invested as part of the whole.
The Board of Trustees oversee the Funds and all investment recommendations. Forsyth Barr has been appointed as the investment manager.
Assists with distributions
Distributions of the investment income from each Fund will be made on an annual basis. The Foundation will make these distributions in accordance with the instructions which have been given by the Donor.
Where the Fund is wholly or partially unrestricted, the Foundation makes the decision as to where distributions are to be made. The Foundation has a Distributions Committee whose role is to advise on these distributions. This Committee receives applications from Community Groups, investigates and considers each application before making recommendations to the the foundation Board as to how the available funds may be distributed.
The Foundation's principal role is to promote and encourage people to contribute to their community.
We encourage giving through the Foundation by way of endowment funds as a means of sustained and ongoing benefit for our community.
(a) Personal satisfaction
Donors get satisfaction they can leave part of their estate as a legacy which will benefit their community forever in whatever manner the Donor wishes. This is of particular benefit to people who have no family or obvious heirs, who often donate 50% or more of their estate to the community. Donors who do have family can obviously get the same satisfaction by leaving part of their estate to the community.
(b) Avoids potential problems of a personal Charitable Trust
Donors may establish their own personal Charitable Trust, which requires considerable initial capital to justify the set-up and operating costs. The potential problems of having a personal Charitable Trust include:
(i) Ongoing trusteeships - Who will continue to manage the Trust after the Donor and the Donor's advisers have passed on?
(ii) Economies of Scale - The compliance requirements and the costs associated with properly managing a Trust mean that the annual administration cost reduces the effectiveness of the gift.
Establishing a Fund through the Foundation has much the same effect as establishing a personal Charitable Trust, but without those problems.
Donors who establish a Fund with the Foundation while they are alive can still be actively involved in how the benefits are distributed.
(a) Ongoing benefit
Most charities desperately need an ongoing passive income source. Where a Donor nominates a particular charity, that charity knows it will continue to receive that income forever without having to go through the effort and uncertainty of making applications for grants. That charity can rely on that income and budget accordingly.
(b) Asset not recorded in financial accounts
If a charity is holding investment funds to maintain an income flow, this sometimes renders the charity ineligible for other funding. If the investments are owned by the foundation, the charity receives the annual donation income, but does not have to disclose the invested capital in its financial accounts.
(c) Expert investment advice
The charity itself does not have to worry about making investment decisions. the Foundation maintains investment expertise on its Trust Board, as well as receiving regular independent specialist investment advice.
(d) Extra source of funding
Even if a charity has not been specified by any Donor, the charity can apply to the foundation for part of the income from the unrestricted Funds. This is particularly valuable for new or emerging charities.
(e) Increased charitable giving
The Foundation is helping to change people's attitude towards leaving gifts to charity in their Wills. Sometimes people decide to leave capital gifts directly to a charity as well as (or instead of) making the gift through the Foundation. This means that the charity may receive a gift it would not have otherwise received.
Trustees and Committee Members are volunteers and are unpaid. The operating expenses of the Foundation are kept as low as possible - we run a lean operation using part-time staff and donated services where possible. The Foundation has a range of strategies to help cover operating costs including maintaining a ‘Family of Foundation Supporters’.
We also suggest that Donors make an initial donation to the foundation of $5,000, payable when the Fund is established, or upon the Donor's death; whichever the Donor prefers. In addition, a donation of 1% of the capital of the Fund is donated to the Foundation each year, deducted from income earned on the fund.
A Board of Volunteer Trustees govern the Foundation, with a part-time Executive Officer. Read more about our current trustees.
We have total transparency, with full information available on our website www.topsouthfoundation.org.nz.
Certain tasks are allocated to a range of support Committees, but ultimately the Board is responsible.
Yes. Community Foundations are one of the fastest-growing forms of philanthropy, operating for over 100 years in the United States and Great Britain. We are one of more than 16 Community Foundations that have been established in New Zealand. The first formed in NZ was The Acorn Foundation in Tauranga, which now has over 300 Funds in place.
None! The foundation is an independent body.
Grants to community organisations take into account:
- The wishes of the Donor
- Greatest community need (where derived from our General Endowment Fund)
- The purpose of the Endowment Fund that the grant comes from (eg. Environmental Fund)
Very strong. Trustees have taken time to lay the groundwork, build a profile, and have established a base of Donors and Supporters. Donors can have full confidence in the integrity of the foundation and be comfortable in the knowledge that a gift left to the Foundation will be properly and safely managed in accordance with their wishes.