- Does the organization that you chose in the Db above have any Charitable lead trusts or charitable remainder trusts?
A charitable lead trust is where a trust will donate to a charity a given amount in order to lower taxes on the trusts’ beneficiaries and then donate further after a specified amount of time. The American Diabetes Association has a Charitable Lead Trust from the Trust of Abby R. Mauze between the amount of $250,000 and $499,999. A Charitable remainder Trust is similar but first dispenses th trust to its beneficiaries and then after a specified amount of time donates the remainder of the trust to a charity. While the American Diabetes Association encourages Charitable Remainder Trusts they have not received any recently.
- Define and outline these two trusts.
A Charitable Remainder trust is designed to avoid taxes for the initial beneficiaries as well as the original contributors of the trust. Since the trust is most majorly an asset designed for charity, contributors of the trust can donate funds to the trust, which will then pay individual beneficiaries (like family members) for a predetermined amount of time and then donate the remainder of the trust to legally categorized charitable organizations.
A Charitable Lead Trust serves a similar purpose but is reversed. A Charitable Lead Trust is meant to lower taxes levied on the estate itself. First the Trust donates money over a specified period of time and of a specified amount to legally recognized charities and then the remainder of the trust is transferred to beneficiaries who will incur significantly less taxation on the estate.
- Does your organization have any endowments a term endowment and quasi-endowments?
American Diabetes Association has $407,000 in endowments. This made from 43 donor-restricted endowment funds and donor-restricted term endowments. ADA’s accounting department predicts, based on investment strategy of endowments, a 7.5% return on endowment investments annually. The ADA did not have any quasi-endowments.
- Indicate the accounting required for each type of endowment.
A normal endowment requires three key areas of accounting. The first area is the investment policy of the endowment. This defines how much risk the manager of the endowment can take on and how aggressive he or she should be in meeting the target’s set for ROI. The second area for accounting is the withdrawal policy. This indicates how often and how much the charitable organization can withdraw funds from the endowment. This can sometimes be based on a percentage of the funds available in the endowment. The third is a usage policy for the endowment fund. This simply indicates how the funds may be used and is specified at the creation of the fund.
The ADA’s endowment portfolio consists of both true and term endowments (no quasi endowments). Term endowments require accountants to note that after a specified period of time or only after the occurrence of a certain event will the donation baa viable in full or in part. A true endowment requires accountants to note that the funds are meant to remain in perpetuity as a gift to the charity. This means that returns on endowment investments may be either spent by the charity in the means specified by the donor or reinvested into the endowment fund.
- If so discuss if this organization filed a 990 EZ or a full 990 and what schedules are also filed.
American Diabetes Assocation filed a full 990 form. They aso have filed a number of schedules. These include expected schedules such as 501©(3), engaged in lobbying activities, donor advised funds, as well as term and permanent endowments as mentioned above. The Association also filed more than 5K in grants from an entity outside the United States, more the 10K in endowments, more than 15K spent on professional fundraising services, and more than 15K raised through gaming activities.