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  1. 1. FREQUENTLY ASKED QUESTIONS What is The Dallas Foundation? The Dallas Foundation, established as a community foundation in 1929, serves as a leader, catalyst, and resource for philanthropy by providing donors with flexible means of making gifts to charitable causes that enhance our community. As a community foundation, the Foundation is a hybrid between a private foundation (whose main activity is awarding grants) and a typical publicly supported charity (whose main activity is providing a service). Like a private foundation, The Dallas Foundation’s main activity is awarding grants. But like other charities, we also provide a service. We help Dallasites and others make effective gifts to charitable causes in Dallas County and around the country. We receive our support from many people in the community rather than a single family. We are considered a publicly supported charity and therefore receive more favorable tax treatment. The Foundation awarded more than $18 million in grants in 2003. Since our inception, we have given more than $100 million in grants to more than 800 agencies. When was The Dallas Foundation established? The Dallas Foundation is the oldest community foundation in Texas. It was established as the Dallas Community Trust in 1929 by G. B. Dealey, George Waverly Briggs and other members of a Dallas group called the Critic Club. The first grant was made in 1939. Renamed The Dallas Foundation in 1942, it hired its first full-time staff member in 1987. How can a donor give to The Dallas Foundation? We have six different kinds of funds: advised, scholarship, designated and agency endowment, field of interest, unrestricted, and supporting organizations. Donors can either make gifts to establish these funds while living, or establish one of these funds through a planned giving vehicle (such as a charitable remainder trust) or straight bequest. • Advised funds (also known as donor advised funds) are typically established by living donors who wish to be actively involved in philanthropy. Some donors set up advised funds with family members as the donor advisors. Our donor advisors have the right to recommend gifts from the funds; some of our donor advisors make such recommendations by letter or fax several times a month, while others do so once every few years. Because we are a public charity and not a private foundation, federal law does not require us to distribute any set amount in grants each year. Our public charity status also provides us several other advantages. 1
  2. 2. We provide a range of services to advised fund donors. If donors do not yet know which causes they wish to support, we can consult with them to refine their giving priorities. We can also research prospective grantees and provide a vehicle for anonymous giving. • Scholarship funds can be established by an individual, a corporation, or a group of people, such as a civic club or trade association. These funds can supply financial support for students at any level of education, or fellowships for people who wish to further their professional development. The Foundation can provide a range of services to scholarship funds, including designing the scholarship criteria and application process and assembling a scholarship advisory committee. • Designated and agency endowment funds benefit a specific agency or agencies. If a donor wants to set up the fund, it is called a designated fund. If the agency itself wants to place its endowment with us, it is called an agency endowment fund. Either way, the fund provides perpetual support for the agency’s operations. The Foundation also holds the “variance power,” which allows it to redirect funds if, for example, the beneficiary agency goes out of business or ceases to serve its original purpose. This power protects the original donor’s intentions. • Field of interest funds benefit a defined area of charitable activity or a certain group of people. For example, we have a field of interest fund that benefits the arts in Dallas County, and another that benefits poor and needy children. Our Governors award these funds during the spring grant cycle. • Unrestricted funds benefit the Dallas community at large in the areas of the arts, education, health, and social services. Our Governors award these funds during the fall grant cycle. • Supporting organizations give donors many of the benefits of a private foundation without the administrative burden. Although there are three types of supporting organizations, we prefer a “Type I,” which allows the supporting organization to have its own board, selected through consultation with, and approved by, The Dallas Foundation. Can I establish more than one type of fund at The Dallas Foundation? Absolutely. A donor can have more than one fund, and funds of multiple types, at The Dallas Foundation. A single fund's character can also change over time, such as a donor advised fund that becomes a field of interest or unrestricted fund when the original donor dies. What is the process for establishing a fund at The Dallas Foundation? Call Mary Jalonick or Kathryn McGill, at the Foundation. We will talk to you about your goals to ensure that we understand your intentions and then will prepare a simple fund agreement for your signature. When the agreement is ready to be signed, you then transfer to us the assets to open the fund. You may write a check, transfer money or stock by wire, or physically deliver a stock certificate to complete the transaction. In the case of physically delivered stock or stock certificates, we will also ask you to sign a stock power to facilitate the transfer. We can also accept gifts of other kinds of assets, such as real estate, but the process takes longer. What kind of assets can be contributed to the Foundation? 2
  3. 3. The Foundation can accept virtually any kind of asset, subject to its gift acceptance policies. Typical gifts are cash and low-basis, highly appreciated securities. Can I contribute to my fund on-line? Yes. Visit the Foundation’s web site, www.dallas, and visit the How to Give/Online Donations section. We can also take donations directly by credit card over the phone if you prefer not to use the web. How is giving to the Foundation more advantageous than setting up a private foundation? Private foundations may be the right vehicle for some donors. But many other people find that a community foundation is a better option. • Convenience. Establishing a fund is quick and easy, and can be accomplished in a matter of days if necessary. Establishing a private foundation takes months, and requires significant expenses in legal costs and filing fees. • Deductibility. A community foundation offers donors the most favorable tax treatment, whereas private foundations are far less tax-favored. • Payout. As a publicly supported charity, the Foundation is not subject to the 5% minimum distribution rule that applies to private foundations. This feature permits donors to start “acorn” funds and allow those funds to build over time before making grants. • Administration. The Dallas Foundation has program and finance staff, auditors, and lawyers available to provide services. The Foundation includes all funds in its audit and tax return. A private foundation must secure these services and file its own return. • Anonymity. Many donors are surprised to learn that their donations to a private foundation, and all grants their foundation awards, are public information, increasingly available on the Internet. The Dallas Foundation, however, is entitled to shield the donor list in its tax return from public view because the Foundation is a public charity. And while we do list our grants in both our tax return and annual report, we do not indicate which fund was the source of each grant. In addition, some donors prefer to make all or some of their gifts anonymously, which we can do very easily. We can also research a charity on the donor’s behalf, which secures the needed information to make a responsible gift while protecting the donor from solicitations from the charity directly. Who manages the Foundation’s operations? The Foundation operates under an eleven-member Board of Governors. All Governors serve without compensation. 3
  4. 4. How much does it cost to use The Dallas Foundation? The Foundation’s administrative fee and the investment management fees chargeable to each fund depend on the type of fund and how its assets are invested. The Foundation’s administrative fee starts at 1.25% and steps down, as low as 55 bp, as the fund grows larger. The current investment fee is 15 bp. For a donor advised fund of $100,000 in our investment pool, for example, the total annual administrative and investment fees would be 1.40%. To encourage the building of permanent endowment funds for nonprofit agencies, the Foundation’s fee for agency endowments is 75 bp regardless of the size of the fund, plus the investment management fee. For other funds, such as scholarships and support organizations, the Foundation’s fee is negotiated based on the level and types of services the Foundation will provide. Can donors to the Foundation choose investments for the funds they establish? Donors may choose among four different investment pools, reflecting different levels of risk tolerance and investment time horizons. Those pools are a Money Market Pool, a Fixed Income Emphasis Pool (70% bonds/30% stocks), a Balanced Pool (60% stocks/40% bonds), and an Equity Emphasis Pool (80% stocks/20% bonds). The Dallas Foundation is the Dallas-area participant in the Merrill Lynch Community Charitable Fund (MLCCF), a national donor advised fund program. The minimum to open a fund through the program is $25,000. Six investment portfolios are available. The Dallas Foundation also has a cooperative arrangement with the American Funds through which donors may recommend that fund assets be invested in one or more actively managed mutual funds offered by the company. By law, we must have oversight of the fund and its investment management, and so the arrangement with the financial consultant must be revocable. That said, we respect the relationship between the financial advisor and the client. In addition to these existing relationships, donors who contribute at least $1 million may request that the funds remain with their existing managers. These arrangements must be approved by The Dallas Foundation’s Investment Committee. How can The Dallas Foundation work with private foundations? For newly created private foundations, we can consult with the foundation on a negotiated fee basis to help it develop grant guidelines and processes, select grants management software, develop investment and spending policies, and evaluate grant applicants, among other services. If a private foundation is nearing a distribution deadline, it may be compelled to award grants to satisfy that deadline, even if it has not fully evaluated the beneficiary charity or the project is not quite ready to proceed. Instead of making such a hasty grant, the private foundation can make a grant to The Dallas Foundation to establish an advised fund. Because we are a publicly supported charity, the grant to The Dallas Foundation satisfies the time-sensitive distribution requirement. The private foundation can then recommend a grant from the advised fund when the private foundation and the ultimate beneficiary are ready. If a person or family has a private foundation but no longer wants the responsibility of administering it, the private foundation can terminate and transfer its assets to The Dallas Foundation. Those assets can then become an advised fund, part of the unrestricted fund, a field of interest fund reflecting the private foundation’s priorities, or any other type of fund desired by the private foundation’s trustees. 4
  5. 5. Whom should I contact if I am interested in discussing a fund at The Dallas Foundation? Please contact Mary M. Jalonick, Executive Director, or Kathryn McGill, Director of Gift Planning at 214.741.9898. They can also be reached by e-mail at and respectively. 5