Community Foundation

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I. Formation

 

The Culver City Rotary Community Foundation was organized in 1987 under the leadership of Larry Knowles (a past president of the Rotary Club of Culver City) as the first president of the foundation.  The organizing committee was comprised of the following: Steven F. Davidson, Cy K. Pierce, two past club presidents:  Larry F. Knowles and the late Jack L. Ross, and the  Club president at that time-Charles R. Perelman.  Mr. Perelman was then a practicing tax attorney, so he prepared the incorporation papers and exempt status filing with the Internal Revenue Service and the Franchise Tax Board.

 

The purpose of forming a charitable foundation was to facilitate the accumulation of funds to advance the projects of the Rotary Club of Culver City by having a vehicle that could accept tax deductible donations.

 

The need for a financially strong Foundation was highlighted by an experience that the Club had.  The Culver City Rotary Club was unsuccessful in its first attempt to obtain a HUD grant from the U.S. government to build RotaryPlaza (1982).  This first attempt failed in part because the Club had less than $1,000 in the bank.  The Club partnered with Retirement Housing Foundation, and a second application was successful.  After this experience, the members of the Rotary Club of Culver City were enthusiastic about forming a foundation to accumulate funds over a period of years, and build an impressive financial base that could be used in support of future projects by the Club in the community.

 

The Internal Revenue Service notified the Foundation of its tentative tax-exempt status under Internal Revenue Code Section 501(c)(3) on July 28, 1987.  This exempt status is different than that of the Rotary Club of Culver City.  The latter is classified as a 501(c)(4) organization.  The difference is that contributions to the Foundation are tax deductible as charitable contributions,  while those made to the Club are not.

 

In 1991 and 1992, Mr. Cy Pierce was able to successfully demonstrate to the Internal Revenue Service that the foundation was a "public charity" and not a "private foundation" by showing that a large proportion of contributions during the initial years of the foundation came from individuals and fund-raisers attended by the community at large, not just from members of the Rotary Club of Culver City.

 

II. Governance

 

From 1987 though June 1997, the Foundation board and the Club board had the same members, with the immediate past president serving as president of the Foundation.  In order to minimize potential conflicts of interest and actual conflicts of time between the operations of the Club and those of the Foundation, early in 1997 the by-laws of the Foundation were amended to provide for the current five person board of directors: two directors-at-large, the current Club president, a secretary-treasurer, and a Foundation president.

 

The by-laws were amended in their entirety on May 23, 2001.  By definition, all members in good standing of the Rotary Club of Culver City are also members of the Foundation.   It is possible that the by-laws may again be amended in their entirety in 2009.

 

III.  Sources of Contributions

 

During the early years of the Foundation, there was emphasize on having every member of the Club make individual contributions in order to increase the funds of the Foundation.  Larry Knowles originally had a goal of accumulating $100,000.  When the $100,000 goal was reached, the Foundation then increased the goal to $200,000.  Currently, only a few members have continued the practice of contributing annually.  All members of Culver City Rotary Club (and, therefore, of this Foundation) are asked to remember the Foundation when considering charitable contributions for the year.

 

To achieve the financial goals, the Foundation sponsored many fund raisers, including rummage sales, art shows in Marina del Rey and in Culver City, a magic show, and silent auctions.  The funds were raised from members of the community, not merely from the members of the Club and Foundation.

 

From the beginning the most substantial individual contributor to the Foundation has been Jack Sugihara with his very generous annual gifts.  The assets of the Foundation continually increased until the beginning of 2008 when the Foundation had assets valued close to $420,000. However, the worldwide economic and financial turmoil of late 2008 and early 2009 also adversely affected the investment portfolio of the Foundation. 

 

The Foundation also receives the net proceeds from some of the Club's fund-raisers in amounts ranging from $7,000 to $11,000 annually, but these funds are immediately expended on the charitable projects that are designated by the board of the Rotary Club of Culver City.   To increase the Club's spending for charitable and humanitarian projects, the Foundation has increased its reliance on earnings from the assets of the Foundation, which are assumed to be 5%. However, since the Foundation has investment fees and other expenses of a little more than 1%, the Club's portion of the foundation budget is based upon "spendable foundation earnings" of 4%.

 

The 5% assumption is being used since the Internal Revenue Service rulesrequire "private foundations" to expend at least 5% of their asset value annually.  The Foundation uses this percentage as a guideline, although it is not binding on the Foundation. 

 

 

IV. Financial Expenditures.

 

A big difference between the operations of the Club and those of the Foundation is that the Foundation can consider long-term expenditure planning whereas the Club's board is restricted to planning expenditures for one Club year only.

 

Most of the budgeted expenditures of the Foundation are designated by the Club's board for charitable and humanitarian projects that do not provide direct or indirect benefits to Club or Foundation members.  For example, Club student exchange costs with Rotary Clubs in Australia and Japan are not funded via the Foundation since the students selected for the exchange are generally relatives of Club members. By contrast, since scholarships to R.Y.L.A. ("Rotary Youth Leadership Assembly") do not necessarily have to go to members of the Club sponsored Interact Club at Culver CityHigh School, these youth scholarships are funded via the Foundation.

 

The Foundation has also accepted contributions from donors who have designated that their contributions be used to fund certain projects such as Polio Corrective Surgery in India, the Culver City Veterans Memorial, water wells in India, and the successful 2008/2009 3-H grant application to The Rotary Foundation.  These restricted contributions may be spent several years later than when the designated contribution was received by the Foundation.  These restricted contributions become the property of the Foundation, but the wishes of the donors are respected. 

 

The statement of "Contributions and Gifts" which is attached to the Foundation's annual "Return of Organization Exempt from Income Tax" (IRS Form 990) filed with the Internal Revenue Service is a public record of how the Foundation spends its funds for charitable and other humanitarian projects.  The document is posted to the Internal Revenue Service website.  The purpose of this required posting is to provide transparency to the expenditures of "public charities."

 

 

 

Modified October 12, 2010