Guidelines for the Establishment of an Endowment at the Fund for Armenian Relief

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• The Fund for Armenian Relief (FAR) is a 501©(3) corporation under the IRS tax code that defines not-for-profit, charitable, tax-exempt organizations. Since FAR is a legal entity, it has the fiduciary responsibility to ensure the financial health of the organization and to ensure that resources are used for legitimate purposes and in legitimate way. 

• An endowment is a fund where the principal is held for investment and the payout on the principal is available for spending as directed by the donor. Endowment gifts are subject to the provisions of the Fund for Armenian Relief’s mission, values, objectives and policies. 

• With the acceptance of endowment funds from a donor, FAR assumes certain fiduciary responsibilities. These responsibilities include making sure the funds are held and expended in compliance with the donor's wishes. For this reason, a new endowment account should be established after obtaining a signed endowment agreement from the donor. 

• The signed agreement ensures (a) the donor clearly understands the policies by which their gift will be managed and (b) FAR clearly understands how the payout is to be used and any other unique terms and conditions of the gift. FAR should maintain in all its financial records a clear understanding of any donor’s restrictions. A separate account is generally created to track the expenses associated with the endowment. 

• Types of Endowments: Endowments could be permanent or term endowments, as funds that are restricted by a donor (or donors) for a specific purpose. Permanent Endowment refers to funds that have been contributed by a donor(s) for a specific purpose in perpetuity. Term Endowment refers to funds that have been contributed by a donor(s) for a specific purpose with the understanding that at some future time or upon the occurrence of a specific future event, the resources contributed become available for some other use. 

• Funds designated for an Endowment require a minimum of $10,000 

• Endowment Management: FAR is responsible for the financial management of its Endowments. As such, FAR should hire a professional money management corporation to provide day-to-day management of the endowed funds. Interest will accrue on annual basis. The pay-out rate should not exceed 4.5%. The excess amount of the accrued interest from a specific Endowment Fund should replenish the principal of that particular Endowment Fund on annual basis.

• Endowment Agreement must specify at a minimum: 

  • The purpose and name of the endowment 

  • The amount and terms of use of the accrued interest 

  • The type of the endowment (permanent or term endowment) 

  • If term endowment, the terms of the graduation of the original purpose should be clearly defined