Guidelines for Establishing a Restricted Fund
These guidelines provide information to consider when establishing a restricted fund. Many donors create restricted funds to establish scholarships or academic program support funds. These funds are typically named for donors or in honor or memory of a loved one.
In considering the establishment of a restricted fund, potential donors should be aware that tax laws require that charitable gifts be irrevocable and unconditional in order for a donor to receive the associated tax benefits. A donor cannot continue to enjoy control over donated funds or property contributed; once a donor has made the contribution, the assets become the property of the charitable organization and cannot be returned under any circumstances.
I. Definitions
a. A restricted fund enables donors to restrict the use of their fund. The Foundation works with donors to document mutually agreed upon guidelines &/or restrictions which govern the use and spending of the fund.
b. A permanently restricted (permanent/endowment) fund, often called an endowment, exists in perpetuity. Gifts to the fund are invested for long-term growth with the understanding that the principal may not be expended, only the income earned.
c. A temporarily restricted (temporary) fund is intended to be short-term in nature. The monies in a temporary fund are not expected to exist in perpetuity and the fund may be expended in its entirety, according to the fund guidelines.
II. Establishing a Restricted Fund – Permanent/Endowment
a. The minimum gift required to establish a permanently restricted (endowment) fund is $50,000. The donor(s) may contribute this amount over a period of one to four years.
b. Guidelines & restrictions for the use of the spendable income generated by the endowment will be agreed upon by the donor(s) and Christ Child Society of Omaha in a mutually executed Fund Agreement, kept on file.
c. A fund that is building toward an endowment will be considered temporarily restricted until the minimum gift threshold has been met, at which time it will be converted to a permanent endowment fund. Investment of temporarily restricted funds will be at the discretion of a majority vote of the Finance Committee.
d. Once the minimum gift threshold has been met, and the fund is endowed, funds will be invested in line with how Christ Child Society of Omaha invests its general fund. Earnings will be calculated at the end of the fiscal year immediately following the initial investment cycle and distributed both to make awards under terms of the Donor’s Fund Agreement, and to increase the corpus of the endowment as allowed by economic conditions and existing board policies.
e. Donors will be contacted at the end of 48 months if the minimum gift threshold has not been met. If, upon consultation with the donor, he/she is unable to fully endow the fund, the fund will remain temporarily restricted and expended in accordance with the Fund Agreement on file.
f. No disbursements will be made from funds building toward the endowment.
Donors who wish to see their scholarship awarded immediately, for example, are encouraged to make an additional current use donation(s).
III. Establishing a Restricted Scholarship Fund (Temporary or Endowed)
a. Donors are encouraged to be as broad as possible when specifying criteria for scholarship funds. For scholarship funds, a donor may request a preference for:
i. Academic merit (minimum overall GPA)
ii. Financial need
iii. Geographic area of residence
iv. School or academic degree/certificate program
v. Eligibility to be limited to U.S. citizens and permanent residents.
b. Donors may not recommend or suggest scholarship recipients. The Internal Revenue Service will not recognize a contribution for charitable tax deduction if the donor retains control over the gift funds or how they are used.
Therefore, a donor may not participate in the selection of scholarship or award recipients, name an individual to the scholarship committee, or structure the criteria so narrowly as to limit selection to a small population comprised
solely or primarily of individuals related to the donor or that the donor would choose without this restriction.
c. Christ Child Society of Omaha Scholarship Committee selects scholarship recipients, unless otherwise stated, based upon the requirements listed on each scholarship Fund Agreement.
d. In the case that a Board member is the donor, they may serve on the Christ Child Society of Omaha Scholarship Committee but must excuse themselves from the selection of recipients for their own scholarship.
e. The Christ Child Society of Omaha does not discriminate on the basis of age, gender, race or color, national origin, religion, disabling condition, marital status, or sexual orientation.
IV. Investment and Distribution of Restricted Funds
a. The Christ Child Society of Omaha Finance and Scholarship Committees will periodically review and approve the investment strategies for all funds and the process for determining annual distribution.
V. Publicity for newly created restricted funds
a. Once a fund has been permanently endowed, publicity regarding the fund will be released to the public unless the donor stipulates otherwise.
Created and adopted by the Christ Child Society of Omaha on October 27, 2020
