When should my nonprofit organization consider offering CGA’s to donors?
Many organizations establish a charitable gift annuity program because they are initially approached by a donor to create such a gift. Unfortunately, in a rush to help the donor make the gift, those same organizations may not consider many of the long term issues associated with such an arrangement. When a "first gift" is truly that - the first of potentially many more - then creating your own CGA program may make sense. When this might be an isolated event or, thinking ahead, your organization may end up with only 3 or 4 such contracts, then perhaps creating a partnership with CGA America may make the most sense for both your organization and your donor.
WHAT DO YOU MEAN BY A "ONE CLICK" CHARITABLE GIFT ANNUITY?
Because of simple paperwork and the ability to DocuSign online, with a single click on a computer, the donor has the ability to receive income payments from a charitable gift annuity.
What options does my nonprofit have for offering CGAs to our donors?
Basically, you have three options. You could do it yourself. You could work with your local community foundation (if they offer such an arrangement), or you could work with CGA America.
What are the risks associated with managing our own CGA program versus working with CGA America?
By operating your own CGA program, the payment obligations to your donors become a liability to your organization. In the event of a donor outliving their life expectancy, investment losses, or a combination of the two, your organization would have to use other assets of the organization to fulfill the CGA contract payment obligations. By working with CGA America, such an obligation would be that of CGA America. So the only "risk" to a charity referring donors to CGA America is that, in the event that payments and market losses depleted the assets, there would be no residual value to be distributed.
Is there any contract or agreement to sign in order for a charity to participate?
No. The only contract is between the individual donor - or donor's designee - and CGA America.
What are the fees?
Administrative fees will not exceed 1% annually. The sponsoring charity, Charitable Gift America, does not charge any fees. This is
How do we market charitable gift annuities to our donors?
That is up to you, and we are available to assist. In general, keep in mind a number of key factors. First, advertising charitable gift annuities specifically tends to be frustrating. A better approach is often to focus on endowment building, of which charitable gift annuities are one of a number of different strategies for your donors to consider. Second, some states, may prohibit your organization from marketing charitable gift annuities without first being licensed in that state. Third, we attempt to make the CGA America website as donor friendly as possible. Please feel free to direct donors to this site, or link with your own website, and we can take care of the rest.
How are the assets invested?
The assets are currently invested and held in custody with one of the largest financial firms in the country. In general, the assets are invested with a long term investment horizon and are governed by CGA America's Investment Policy Statement.
To provide an additional level of security for the philanthropic assets, a segregated fund maintains assets at least equal to the sum of the reserves on its outstanding annuity agreements plus a surplus of 10%. The reserve amount is calculated using the following assumptions set forth in Sec. 627.481(2)(a)1.b. This extraordinary effort ensures contracts are safe, in compliance with all State of Florida regulations and the Philanthropy Protection Act of 1995 (P.L. 104-62). Investment of the segregated reserve fund is limited to no more than 50% equities (including mutual funds) and no more than 10% may be invested in any one stock or fund.
What if my donor wants to terminate an existing CGA contract?
While your donor could not direct payments to another individual, he or she could terminate their interest. In that event, the residual value of the gift would be distributed to the benefitting charity just as if that same donor were deceased.
Can we transfer our existing CGA program to CGA America?
Possibly. If your charity is hoping to discontinue its existing CGA program, CGA America would be open to accepting those collective contracts into its own program. In general, in order to accept such a liability, CGA America would require that the original value of each contract were transferred with the understanding that the benefitting charity would recoup those assets upon the termination of those contracts.
How will I be notified of the value of a contract that my charity is scheduled to receive?
CGA America calculates the value of each contract on a quarterly basis. When given permission by the donor to share such information, we report the fair market value and associated liability of the contract(s) scheduled to benefit your organization soon thereafter.
How do I record such a gift for my organization?
That would be up to your organization and its chosen auditor. However, we typically see three common methods. First, it gets treated similar to a charitable remainder trust or other irrevocable vehicle presently scheduled to benefit your organization. Second, the asset is record and footnoted. Third, since your organization doesn't own the asset or the liability, it is not recorded at all.
What if my donor wants to change the organization that benefits from their CGA contract?
Yes, that is an option for the donor. Such an arrangement allows a donor to make a single gift with CGA America rather than multiple contracts with multiple organizations.
Will CGA America solicit my donors for additional gifts?
While there is no obligation on the part of your organization, we do fully understand the need of nonprofit organizations to perform their own due diligence on CGA America before becoming comfortable to share the information with their donors.
The CGA America team would be pleased to speak with you directly or participate in a conference call with your organization's leaders in order to assist in that process.
Because of the deep expertise of the CGA America team, we can also be an extended resource for other charitable gift planning needs, marketing your program, and fund development trainings for your team.
Download the Disclosure Statement in .pdf format to share with donors and advisors.
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FAQs from Nonprofit Organizations