There are hundreds of state and credit union league foundations across the United States that accept and disperse charitable donations with the goal of leaving a lasting legacy on their communities.
Here, three credit unions and two leagues discuss start-up capital for their foundations, ongoing financial stability, and more. For credit unions thinking about standing up their own foundation, these perspectives can jump-start strategic conversations.
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Interchange + Fundraisers + Employee Contributions
John Sackett, President, Royal Credit Union Foundation
Royal Credit Union ($2.3B, Eau Claire, WI)
John Sackett, President, Royal Credit Union Foundation (Est. 2012)
Where did you find startup capital? Was it difficult to obtain?
John Sackett: Initial funding for the RCU Foundation came from the sale of Visa stock. It was unanticipated income to the credit union and a perfect opportunity for the RCU Foundation, which had been in a formative state for many years.
How long did it take to break even?
JS: When the foundation started, it had funds in place from the Visa stock sale and we do not donate or spend beyond the funds we have available.
How do you ensure financial stability?
JS: Starting in 2019, the foundation will move to a semi-annual grant review process. This will allow us to better plan and allocate each year’s available donation funds. The foundation also pursues short-term investments, such as CDs, and holds a portion of funds in reserve.
How does the foundation earn its funds today?
JS: Ongoing funding for the RCU Foundation comes from four main sources.
CU QUICK FACTS
Royal Credit Union
Data as of 06.30.18
HQ: Eau Claire, WI
ASSETS: $2.3B
MEMBERS: 200,472
BRANCHES: 49
12-MO SHARE GROWTH: 8.6%
12-MO LOAN GROWTH: 12.9%
ROA: 1.09%
First, interchange income on debit card transactions. Specifically, once per year the credit union directs a $0.02 contribution from every debit transaction to the foundation.
Second, two community events each year support local non-profits and raise funds. Our annual Rock the Riverfront featuring the Charity Classic is a run/walk event that includes games, live music, and food. We hold this event in Eau Claire, WI, where Royal Credit Union is headquartered. We partner with three local non-profits to raise awareness and funds for their causes. All three receive a donation, but event participants pick the big winner via a free vote with registration and additional paid votes. We also partner with YMCA Twin Cities for Prairie Burn Music Festival in Hudson, WI.
Third, team members give through payroll deduction and paid jeans days.
Finally, we accept unsolicited gifts via a website portal and give now button.
Fundraisers + Grants
Pier Yvette Alsup, Chief Community Engagement Social Responsibility Officer, American Eagle Credit Union Foundation
Anheuser-Busch Employees’ Credit Union ($1.8B, St. Louis, MO)
Pier Yvette Alsup, Chief Community Engagement Social Responsibility Officer, American Eagle Credit Union Foundation (Est. 2016)
* American Eagle Credit Union is a community division of ABECU
Where did you find startup capital? Was it difficult to obtain?
Pier Yvette Alsup: The credit union gave a donation to get the foundation started.
How long did it take to break even?
PYA: The American Eagle Credit Union Foundation has been active for a couple of years. We do not have one person solely dedicated to the foundation, so we are deliberate in balancing our programming and grants offered with our resources available. We have never donated funds we did not have, which ensures we remain in a positive position.
How do you ensure ongoing financial stability?
PYA: The foundation receives most of its funds from fundraisers and grants. We are currently developing a formal donor and steward program to help ensure ongoing financial stability.
How does the foundation earn its funds today?
CU QUICK FACTS
Anheuser-Busch Employees Credit Union
Data as of 06.30.18
HQ: Saint Louis, MO
ASSETS: $1.8B
MEMBERS: 130,378
BRANCHES: 29
12-MO SHARE GROWTH: 2.9%
12-MO LOAN GROWTH: 4.6%
ROA: 0.98%
PYA: The foundation receives most of its funds from fundraisers and grants.
The fundraising money comes from both members and the general public. For example, we have a successful trivia night and members, employees, and the non-members pay to attend. One of our largest sponsor groups donates the venue, food, and all beverages for the event. All the funds raised go to the foundation. We will start our first holiday appeal targeting our members for a donation in the next couple of months. We also receive a lot of in-kind donations and sponsors from vendors and partners.
As we are a new foundation, my goal is to receive at least $10,000 in grant money per year. We use several databases, such as the Foundation Directory and Grant Watch, to look for grants for which we can apply. We recently received a grant from the Heartland Credit Union Association.
Investment Income + Voluntary Contributions
Kyle Swisher III, Executive Director, Credit Union Foundation of Maryland and the District of Columbia
CU Foundation MD|DC
Kyle Swisher III, Executive Director, Credit Union Foundation of Maryland and the District of Columbia (Est. 2011)
Maureen McAtee, Former Executive Director, Credit Union Foundation of Maryland and the District of Columbia
Where did you find startup capital? Was it difficult to obtain?
Maureen McAtee: In 1991, Credit Union Insurance Corporation (C.U.I.C), a deposit insurance corporation that served state-chartered credit unions in Maryland, shut down. With the nearly $2.4 million in equity leftover after the corporation was dissolved, C.U.I.C. opened as the C.U.I.C. Foundation.
Kyle Swisher III: In 2004, the foundation was restructured and renamed the Maryland Credit Union Foundation. In 2006, to better reflect the foundation’s growing outreach, its name was changed to The Credit Union Foundation of Maryland and the District of Columbia. That same year, the foundation began receiving charitable support for its programs from credit unions, individuals, businesses, and the community at large, an important step in the organization’s effort to convert to a public charity.
How long did it take to break even? What considerations should an organization make when forming a foundation?
KS: We are one of a few financially self-sufficient credit union-based foundations. Most rely on support for human resources, programs, office expenses, and more from their sponsoring organization, mostly credit unions or credit union leagues.
To establish what it would cost and therefore how long it will take to become self-sufficient, a foundation needs to establish a budget for total operating expenses and calculate anticipated charitable income.
A credit union could fund a foundation with an annual contribution of $150,000 or more to cover payroll, benefits, and other operating expenses. The foundation then would require additional funding for its program expenses.
Should the new foundation wish to pay operating expenses from a board-designated endowment, the founding credit union would need to create the endowment and invest that endowment reasonably to generate operating expenses for the new foundation. In the case above $150,000 in annual operating expenses a credit union could seed the endowment with a donation of $2.5 million and create an annual yield of 6%.
How do you ensure ongoing financial stability?
KS: Our foundation focuses on training grants, small credit union support, financial literacy, scholarships, and workforce development. It’s important for foundations to focus their efforts close to the industry they represent. You wouldn’t want to establish a foundation to divert charitable support away from your area of expertise.
By focusing on core values that are near and dear to credit unions, we can earn support from like-minded organizations and individuals as well as seek funding from private and public sources.
Public Vs. Private
Every section 501(c)(3) organization is classified as either a private foundation or a public charity, according to the IRS. Per the agency: Public charities generally receive a greater portion of their financial support from the general public or governmental units and have greater interaction with the public. A private foundation, on the other hand, is typically controlled by members of a family or by a small group of individuals and derives much of its support from a small number of sources and from investment income.
At its start, the Credit Union Foundation of Maryland and the District of Columbia was organized as a private operating foundation. However, according to Swisher, once the organization gained began receiving support from various public and private sources, it filed with the IRS to begin the 60-monthtest period to convert to a public charity. It has since completed and passed that test period.
Our diversified investment strategy allows for income from our board-designated endowment to cover our operating expenses and grow the endowment to fund programs.
We have established multiple sources of income, and whereas we are a small organization, we keep operating expenses to a minimum so we can invest in the programs we offer.
How does the foundation earn its funds today?
KS: As a public charity, we receive our income from two primary sources: investment income and voluntary contributions made by individuals, businesses, and other interested parties. We earn those donations by focusing on issues important to our donors and producing programs that demonstrate our commitment to the non-profit banking model at the center of the credit union movement.
Fundraisers + Credit Union Gifts + Business Donations
David Miles, Senior Vice President, Chief Advocacy Regulatory Officer, Credit Unions Care Foundation of Virginia
Virginia Credit Union League
David Miles, Senior Vice President, Chief Advocacy Regulatory Officer, Credit Unions Care Foundation of Virginia (Est. 2009)
Where did you find startup capital? Was it difficult to obtain?
David Miles: The Virginia Credit Union League, as the sponsoring organization, made a small initial capital contribution as well as paid the legal fees to charter the foundation. In that regard, the capital was not difficult to obtain, it just required the commitment by our board of directors, which believed this was worthwhile support of the credit union community.
VACUL’s charitable arm is the Credit Unions Care Foundation of Virginia. We organized in 2009 to formalize what we previously were running through two league committees the Community Involvement Committee and the Financial Education Committee. As a state trade association, our experience might not be directly analogous to credit unions. For example, many credit unions have hundreds, even thousands, of potential donors their members. Credit unions also are more closely tied to the business community through their vendors.
How long did it take to break even? What considerations should an organization make when forming a foundation?
DM: We were committed to break even from day one because we didn’t hire staff. Instead, league staff members voluntarily manage the foundation. Not having an executive director might have slowed our progress and hindered our ability to generate donations, but we believe we should only hire personnel if we can insure that most of the money we raise will go to charitable causes. We want to keep the ratio of charitable expenses/revenue in the 70%+ range.
We field a small number of inquiries from credit unions that are debating the merits of starting their own foundations. I’ve found these are mostly questions of process, such as how to incorporate within the state of Virginia (form a non-stock corporation and register with the Department of Agriculture and Consumer Affairs), how to apply to the IRS for 501(c)(3) status (submit an application with various schedules and three-year budget), and the expected timeframe for receiving a charter (six months is a good estimate).
How do you ensure ongoing financial stability?
DM: We have set a floor in place to maintain certain cash reserves.
How does the foundation earn its funds today?
DM: Fundraisers, gifts from member credit unions, and donations from business partners.
Fundraisers + Credit Union Usage + Endowment
Dennis Paul, VP of Business and Community Development, Elevations Credit Union
Elevations Foundation (Est. 2010)
Dennis Paul, VP of Business and Community Development, Elevations Credit Union
Where did you find start-up capital? Was it difficult to obtain?
Dennis Paul: Elevations Foundation launched as a public charity in 2010 with capital provided by Elevations Credit Union. Since its inception, the Foundation has received an annual donation from the credit union, supplemented by contributions from credit union staff and other fundraising initiatives and events that allows it to cover administrative expenses and provide funding for its community grants and scholarship programs.
How long into the life of the foundation before you able to breakeven?
DP: Given that the Foundation is charged with carrying out the philanthropic endeavors of Elevations Credit Union we will continue to receive funding from the Credit Union. As such, the concept of break-even’ is not one that maps perfectly to public charities such as Elevations Foundation, which are by-definition philanthropically supported and typically have little earned revenue. Work is presently underway to diversify the Foundation’s funding sources, including deploying initiatives that will enable credit union members to integrate support of the Foundation with their ongoing banking activities. We expect that this will supplement and displace an increasing share of the credit union’s annual contribution during 2019 and 2020.
How do you ensure ongoing financial stability?
DP: Ultimately, successful credit union foundations are funded through the integration of their members into supporting their respective foundations through products and services. An example of this type of passive fundraising would be to offer an opt-in option associated with a specific product. In Elevations case we are working on around-up program whereby members can choose to have VISA debit card transactions rounded up to the nearest dollar with that difference going to the foundation. This is a one-time opt-in that results in a donation stream that the member does not require subsequent action on. Other product-based donation channels might include a Foundation affinity card with a per-swipe feature, an opt-in fee on a branded checking account, and others.
The Foundation is slowly building an endowment that will eventually become an important source of financial stability. Contributions to that endowment are being made annually by the credit union, and it will also be funded by contributions from other fundraising activities as those mature. The Foundation is also working to diversify its funding sources and approaches as a buffer against downturns in any single revenue source.
How does the foundation earn its funds today?
DP: Public charities do not typically earn a large share of their revenue, though there are numerous and increasing exceptions to this. The Foundation is presently funded through donations from multiple sources, including the credit union, its employees, the membership, and sponsored fundraising events (e.g. charity golf tournament). In 2019 and 2020 we expect to deploy new fundraising initiatives that will engage members of the credit union as philanthropic supporters of the Foundation. We would note that we receive significant member contributions when we put out a donation request for disaster relief, i.e., wildfires, floods, etc. Elevations members are the best and in times of need they step up in a significant way.
These interviews have been edited and condensed.
