Four Benefits of Founding a Charitable Foundation

Associations and charitable foundations have become increasingly popular. However, many are still unsure why a credit union would want to take its already existing charitable activities and move them into a separate organization. After all, setting up an association takes time and money, so what are the benefits?

In its most basic form, a charitable foundation is an extension of the charitable arm of the credit union. When a credit union establishes a charitable foundation and moves its existing charitable activities into it, it can build, brand, and expand the program. With its own board and dedicated employees, the foundation can devote the time and resources necessary to grow its charitable giving and community outreach programs. As the foundation’s creator, the credit union can promote the foundation and its work to the community and its membership.???

While most credit unions establish charitable foundations to house and grow their current philanthropic giving programs, some credit unions and even CUSOs have founded charitable foundations to offer such programs to multiple credit unions, their members, and their communities. These organizations are typically branded neutrally to make the offerings more palatable to other financial institutions. They often offer a “plug and play” solution that is easy to implement and gives the credit union all the benefits without needing to go through the process of creating its own program or foundation. This effort can be taken one step further with multiple credit unions and CUSOs collaborating to create a foundation or association with a goal to bring together the programs that have value and the individuals and communities that will benefit from them.

Associations and charitable foundations allow credit unions to serve the underserved in more ways. Foundations can help build homes, provide financial literacy programs, and provide educational funding and scholarships. The only limit is the activities must be charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competitions, and preventing cruelty to children or animals. Within those bounds is a lot of room to serve underserved populations.?

Finally, depending on a credit union’s field of membership, the association or foundation may be added to the credit union’s field of membership. Then, as long as certain requirements are met, the foundation members will qualify for membership in the credit union.

However, if the primary motivator is to expand the credit union’s field of membership through the foundation, then the credit union should reconsider the use of an association to accomplish this goal. The NCUA and similarly situated state regulators evaluate associations offered for field of membership expansion to ensure that they meet certain criteria and are, in fact, legitimate organizations with a purpose that afford their members certain rights and opportunities.?

Amanda Smith