Tab 19: Sample Disclosure Documents

Suggested Document

• Sample disclosure documents

 

What is the focus of the sample disclosure documents tab?

This standard focuses solely on the gift planning process; accordingly the sample disclosure documents related to the standard also focus solely on financial benefits accrued during the gift planning process. In short, the standard and related documents seek to ensure that a donor is informed when his/her particular gift results in a direct financial benefit to a third-party and that benefit is derived directly from the gift itself. Third-party participants in the gift planning process include, for example, financial advisors. Attorneys and estate planners who facilitate a particular donor's gift to the community foundation also would be third-party participants in the gift planning process if the fees paid to them by the community foundation are contingent on and paid directly from the donor's gift.

What financial arrangement does the sample disclosure document tab address?

Some community foundations have relationships with financial advisory or asset management firms in which the gifts of clients referred by a firm will be managed by that firm. The firm may, in turn, compensate the employee whose referral brought the assets under management. It is never appropriate for a community foundation itself to compensate or pay a finder's fee or commission to a third-party participant in such a transaction.

If your community foundation has an arrangement with a financial institution, you must include the sample disclosure documents that make the nature of the relationship transparent, identify the parties that may benefit financially, and make it clear that no payment is being made by the community foundation to the firm or its employees in exchange for making referrals.

Does this disclosure requirement apply to situations where the community foundation retains legal counsel related to the acceptance of gifts?

If your community foundation pays legal counsel for help in understanding the legal ramifications of a potential gift that comes out of your operational budget and not from the donor's gift, this payment is not subject to this standard. If the fees paid by the community foundation to attorneys and estate planners who facilitate a particular donor's gift to the community foundation are contingent on and paid directly from the donor's gift, these attorneys and estate planners would be third-party participants in the gift planning process and their relationship with the community foundation would be subject to this standard.

What are some examples of items that are NOT the focus of the sample disclosure tab?

By contrast, fees paid to investment managers for management of the overall community foundation investment portfolio usually would not be the subject of this standard or document because investment management fees typically are charged based on the size of the portfolio managed rather than as a result of a particular donor's gift. Likewise, fees paid to legal counsel by the community foundation out of its operational budget to help the community foundation understand any legal ramifications of a potential gift also are not the subject of this standard or document since such fees typically are not paid directly from the donor's gift.

Are there any other clarifications for the sample disclosure tab?

Some community foundations may not have relationships with third-party participants that result in financial benefit to those participants. Community foundations that do not have such relationships should submit a statement signed by the CEO explaining that the community foundation does not provide financial benefits of any sort to third-party participants. Community foundations that do have financial relationships with third-party participants should provide sample disclosure documents that demonstrate how the community foundation fulfills the key elements outlined below.

Asset management firm
Professional manager of securities (shares, bonds etc.) and assets (e.g., real estate), to meet specified investment goals.

Financial advisory firm
Investment banking specialists who offer advice and personalized service.

IRS Form 990
Form 990 is an annual reporting return that certain federally tax-exempt organizations must file with the IRS. It provides information on the filing organization's mission, programs, and finances.

Third-party participant
A person who is involved in an event, legal proceeding, agreement, or other transaction only by chance or indirectly.