Valuation Guidance

Question V.D: Foundation & Trusts

With this question, CECP seeks to understand better the prevalence of different foundation models and the movement of money between your company and its foundation.

Survey Instructions:

o If your company has multiple corporate foundations, please answer this question from the perspective of the foundation that gives the most money annually.

o When reporting the total dollar amount of corporate funds transferred to the foundation or trust, record only funds that come from the company’s budget. Never include gifts made by individuals, such as employees or even senior management; record only the amount of the gift from the company to the foundation.

o In this question, record the amount of money transferred from the company to the foundation; the amount of money disbursed by the foundation in a given year to 501(c)(3) organizations will be recorded in Questions II.A-IV.A. The distinction between the amount transferred from the company to the foundation and the amount disbursed by the foundation is critical; for example, a company can transfer more money to its foundation than the foundation actually disburses that year (and vice versa).

Foundation Structures

Predominately Endowed: Endowed foundations have asset reserves (cash, stocks, bonds, etc.) that they invest to make a return. The money needed to make grants to nonprofits comes from the returns on these assets each year—typically endowed foundations disburse 5% of the total value of assets held, as a legal minimum. In this way, endowed foundations are not dependent on the annual transfer of funds from the corporation, as the endowment generates funds for grantmaking. Please use this designation if all or the vast majority (75%+) of your corporate foundation’s funding comes from the returns on an endowment.

Predominately Pass-Through: A pass-through foundation receives funds from the company and distributes those funds over the course of the year (either calendar or Fiscal Year). The annual funds from the company often take the form of cash or appreciated stock and may be transferred from the company to the foundation once or incrementally throughout the year. Occasionally, pass-through foundations have reserve funds to “cushion” against lean times, but they are nonetheless distinct from endowed foundations because a pass-through foundation does not face restrictions in spending down the principal of the asset reserve it has created. Please use this designation if all or the vast majority (75%+) of your corporate foundation’s funding comes from the company on a yearly basis (even if a modest “cushion” of funds has built up over time).

Hybrid: Some companies blend the endowed and pass-through models, with neither model truly dominating. The reserve fund “cushion” is robust, but nonetheless the foundation receives reliable annual funds for disbursement that must be contributed within the giving year.

Operating: This foundation structure is very rare for corporations. An operating foundation does not make grants to nonprofit grantees but instead functions as a nonprofit organization in its own right by using at least 85% of its assets to offer charitable services or programs directly to end-recipients. Pharmaceutical companies sometimes create operating foundations for their Patient Assistance Programs, which service individuals directly.

Other: Your corporate foundation may be structured in a way other than the types listed above. If this is the case, please choose the “Other” designation and use the “Notes” field to provide CECP with a more specific description so that we may refine future surveys accordingly.