Credit unions have always had a philanthropic bent, but increasingly cooperatives are launching their own foundations to fund charitable causes. Foundations allow credit unions to expand their philanthropic mission while giving members a tax-deductible vehicle for donating funds to the community.
Still, because credit unions fully subsidize the foundation’s administrative costs, the potential for creating another institution that becomes both a distraction and a drain on cooperative resources is real. And foundations that get off to a strong start fundraising can later stagnate, unable to grow because the money spigot has dried up. Although members provide some funding through separate tax-deductible contributions, those funds won’t be enough.
So to fund their foundations, credit unions follow one of two paths. The first is to create a dedicated source of funding from within the credit union, such as ATM fees or some other revenue stream that is diverted to the foundation. The other option is to go outside the credit union and raise the money. There are pros and cons to each path, but adequate funding is the key to the foundation’s growth and long-term success.
CU QUICK FACTS
State Employees’ Credit Union
Data as of 06.30.15
HQ: Raleigh, NC
12-MO Share Growth: 7.30%
12-MO Loan Growth: 10.38%
Foundations don’t come cheap, but even credit unions with successful fundraising methods prefer to absorb all the costs of running the foundation rather than spend any of the money they raise on administration.
“Our goal is to give out what we take in,” says Mark Twisdale, executive vice president at State Employees Credit Union ($30.8B, Raleigh, NC) and the executive director for its SECU Foundation, which raised nearly $13 million last year. Established in 2004, the award-winning foundation funds local development projects in addition to handing out scholarships to students attending one of North Carolina’s 16 state universities. “We want that money working for the community as soon as possible.”
CU QUICK FACTS
Chartway Federal Credit Union
Data as of 06.30.15
HQ: Virginia Beach, VA
12-MO Share Growth: 6.93%
12-MO Loan Growth: 32.79%
At a minimum, a foundation will need at least one or two full-time employees and its own governing board, plus it adds to the workload of the credit union’s executive, marketing, and accounting staff. Together, those costs can easily exceed $100,000 a year. For that reason, establishing a foundation is not a decision made lightly.
“Don’t do it because everyone else is doing it. If you start a foundation for that reason, it will ruin the credit union,” says Ron Burniske, CEO of Chartway Federal Credit Union ($2.0B, Virginia Beach, VA), which established its We Promise Foundation in 1999 to help sick children and their families cope with debilitating or life-threatening illnesses. Instead, Burniske urges credit unions to do a little soul-searching first. “Do it because you believe in your heart that what you are doing matters.”
Attracting Dollars With Hollywood Glitz
From $10,000 in its first year, the We Promise Foundation has steadily grown, raising $1 million in 2014. Chartway hosts between 10 and 20 fundraisers a year, but its signature fundraiser is a two-day affair held every September, combining a black-tie gala attended by 500 people and a golf tournament with more than 140 competitors.
Together, the gala and golf tournament attract at least 40 sponsors, with the lead sponsor donating $75,000. In addition, gala tickets sell for between $400 and $750 per couple. Both events are usually sold out by June because Chartway puts on quite a show. In its first year, the foundation lured professional wrestler Ric Flair to the event, and when word spread through their agents, other celebrities jumped on the bandwagon.
If you were to fund the foundation with ATM fees, you limit your exposure to other sources of funding, which limits the foundation’s overall potential.
“We always bring a couple of people from Hollywood,” Burniske says. Past attendees included actresses Morgan Fairchild and Teri Polo as well as classic rock bands like Chicago, Styx, and Kansas who play at the party.
The golf tournament also attracts big names. Last year, professional golfer Marc Leishman played at the event, donating $7,000 to the foundation. “When you bring a big name in, you’re rewarding your contributors.” Plus, everyone has such a wonderful time, Burniske adds, that afterwards “people say, ‘Next year I’m in.’”
Courting outside donors offers the credit union an expanding funding base, something that Burniske says he could never achieve any other way. “If you were to fund the foundation with ATM fees, you limit your exposure to other sources of funding, which limits the foundation’s overall potential,” he says.
The downside, though, is the events are becoming too big. Already, Chartway has run out of venues large enough to accommodate more than 500 people, restricting the size of its gala. Then, there’s all the work, which requires a full-time event planner and an executive director, along with an estimated 2,000 to 3,000 hours of donated staff time.
We want our investment in our community to be from our members only.
No Nonmember Donors, Please
At SECU, the philosophy about funding a foundation is the antithesis of Chartway’s. The credit union doesn’t accept any outside contributions and has even turned away checks from nonmembers.
“We want our investment in our community to be from our members only,” says Twisdale.
To drive that point home, every grant or gift the foundation bestows carries the footnote, “From the members of State Employees Credit Union.”
And there’s no shortage of money. The credit union fully funds its philanthropic enterprise by diverting its $1 monthly maintenance fee on checking accounts to the SECU Foundation. That might not sound like much, but SECU serves all of North Carolina and has 1.1 million checking accounts, up from 480,000 when the foundation first began 11 years ago.
That steady revenue stream frees SECU from the hassle of fundraising, allowing for a lean administrative team. As executive director, Twisdale is the foundation’s only employee, and he isn’t even full-time. Meanwhile, SECU’s large footprint and growing membership has done wonders for expanding the foundation’s coffers.
Nevertheless, the credit union’s funding source has its limits, relying on either a steady infusion of new checking accounts or an increase in its monthly account fee. But with nearly $13 million coming in to the foundation annually, it’s a problem most credit unions dream of.