Charitable donation accounts can help credit unions continue to give during uncertain times
If the past two years have taught us anything, we now know we have to be prepared for the unknown. From a global pandemic to volatile financial markets to unrest overseas, it can be hard for an organization to know what can be safely budgeted for charitable giving. At the same time, organizations are facing extreme pressure from consumers and employees to be good neighbors and support organizations that help their communities grow.
Research from the Urban Institute found that most 501(c) organizations experienced donation growth from 2015 through 2019, but saw that trend reversed in 2020. From 2015 through 2019, 58 percent of organizations experienced growth in donations, 32 percent experienced stable donations, and 10 percent experienced decreased donations. The events of 2020 disrupted donations to smaller nonprofits more drastically than large nonprofits with nearly half (42%) surveyed with budgets under $500,000 experiencing decreased donations in 2020, compared with 29 percent of organizations with budgets of $500,000 or more.
Workforce has also emerged as a top challenge plaguing all industries across the country, and credit unions are not sheltered from the issue. Corporate giving can be an important workforce attraction tool. A recent survey from America’s Charities found that 86% of corporate leaders believe employees expect them to provide opportunities to engage in the community, and 87% of corporate leaders believe their employees expect them to support causes and issues that matter to those employees.
Philanthropy is part of the credit union DNA, and credit unions have risen to meet the needs of members and communities during these challenging times. But the sustained need for support continues to rise. A Charitable Donation Account is a tool credit unions can use to help maintain their charitable giving as we continue to navigate uncharted waters.
A Charitable Donation Account (CDA) is an investment account that enables a credit union to diversify holdings, which reduces risk and increases the expected rate of return. Credit unions are then able to fund charitable contributions through investment returns rather than operating income. In the midst of the pandemic, this investment tool allows credit unions to stretch charitable giving in a time where many charitable organizations have seen a drop in corporate giving.
Although CDAs were made permissible in 2013 when the National Credit Union Administration issued a ruling that amended NCUA §703 and 721, the ability to use such accounts has become even more important during the pandemic.
In the spirit of people helping people, a CDA account enables credit unions to continue to give at pre-pandemic levels while reducing operating expenses.
Regardless of how your credit union structures its giving, let’s keep up the good work and keep our local communities growing.