Nonprofit organizations play an essential role in our society, providing vital services and programs to support communities and individuals in need. However, running a nonprofit organization can be challenging, especially when it comes to managing finances and fundraising.

Establishing a nonprofit fund (also known as an agency fund) at a community foundation can provide numerous benefits to organizations, making it easier to manage their finances and focus on their mission.

In this blog, we will explore some advantages of establishing a nonprofit fund at a community foundation.

What is a Nonprofit Fund?

A nonprofit fund is a type of fund created at a community foundation by a nonprofit organization.

The nonprofit organization deposits assets, such as money, into the fund, and the community foundation manages the fund on behalf of the organization. The nonprofit organization can use the fund to support their programs and services, and the community foundation provides support and guidance on managing the fund.

Most importantly, nonprofit funds help 501(c)(3) organizations sustain their good work into the future.

Benefits of Establishing a Nonprofit Fund at a Community Foundation

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1. Professional Investment Management

One of the main benefits of establishing a nonprofit fund at a community foundation is professional investment management. Community foundations have investment professionals who manage the funds and work to maximize returns while minimizing risk. This means that nonprofit organizations can benefit from professional investment management without having to hire their investment professionals.

At San Diego Foundation, for example, we provide world-class investment managers and strategies for fundholders, and all investments are overseen by our experienced Investment Committee and Investments team on staff.

2. Access to Investment Opportunities

Community foundations also have access to a wide range of investment opportunities that may not be available to individual nonprofit organizations.

For example, SDF offers seven investment portfolios for fundholders to choose from, including endowment and non-endowment portfolios. By pooling resources with other nonprofit organizations, nonprofit funds at community foundations can gain access to these investment opportunities.

3. Streamlined Administration

Managing a nonprofit organization’s finances can be time-consuming and complex. Establishing a nonprofit fund can help to streamline administration, as the community foundation handles all of the administrative tasks associated with managing the fund. This includes investment management, accounting, gift acknowledgments and reporting, allowing nonprofit organizations to focus on their core mission.

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4. Tax Benefits

Nonprofit funds can also provide tax benefits to organizations. Donations to nonprofit funds are tax-deductible, and the nonprofit organization can receive a deduction for the fair-market value of the assets donated to the fund. This can help to incentivize donors to contribute to the nonprofit fund, providing additional resources for the nonprofit organization to support their programs and services.

At SDF, we make it easy for nonprofit fundholders to fundraise for your fund through the Nonprofit Fund List on our website or by working with our team to set up your nonprofit fund donation page maintained by SDF. Donors may contribute at any level to already existing funds.

5. Permanence and Sustainability

Establishing a nonprofit fund can also provide permanence and sustainability. The fund can be established as an endowment, which means that the nonprofit organization can use the income generated by the fund to support its programs and services while the principal remains intact.

This can help to ensure long-term sustainability, providing a stable source of funding for years to come. Having a constant source of funding to weather resource gaps that may occur throughout a fiscal year helps to ensure that your vital programs and staff will not be affected.

Learn More

Hundreds of forward-thinking, local nonprofits – like Challenged Athletes Foundation, PFLAG San Diego County, Greyhound Adoption Center and more – turn to us to establish nonprofit funds.

Establishing a nonprofit fund at a community foundation provides numerous benefits to organizations, making it easier to manage finances and focus on their mission.

If you are considering opening a nonprofit fund for your organization, contact us or learn more about the benefits on our website.

Learn More about Nonprofit Funds