Alan Walker on Establishing a Memorial Award through the Ontario Arts Foundation
What is involved in setting up an award or scholarship in someone’s memory?
Initially, we have a conversation with the donor or person establishing the fund, as we did with Tom Rooney when he set up the Gina Wilkinson Award. We start with the basics: when you talk about a memorial award or a scholarship, what is your objective? Beyond that general objective, how do we put some shape around what the award will look like? Tell me a little bit about the person, their life in the arts and the things that are important to you that we can use to frame the award. If the award will be supported by fundraising, what language will you use to communicate your goals to potential donors.
We have a conversation around the nomination and selection process. Will candidates apply or be nominated? Will you have a jury and, if so, how will members be sourced? What will be the frequency of the award and the amount to be awarded? How much money is needed to support an award of ‘x’ dollars?
Let’s say you want to offer an award of $1,000. In today’s market, to generate an ongoing award of $1,000 and not dip into the capital, you will need at least $25,000 to $30,000.
Sometimes you want to respond immediately to a situation and do not have the time to formalize everything before the money starts flooding in for a cause (in Tom Rooney’s situation, for example). Can the process accommodate this situation?
It is important to have a conversation early on that looks at a longer horizon than the donor may be considering initially. It is important to craft a trust agreement that will meet the objectives of today and create the framework for the long-term sustainability of the fund. We explain the legal terms and how the fund will be administered. We outline the role of the Ontario Arts Foundation and the donor’s role, and ensure that what is put in place reflects the donor’s objectives for the award.
What is involved in the documentation process?
The trust document has two components. One is the legal agreement creating a long-term capital fund, which appoints the foundation as trustee and sets out how the fund will be administered , the assets invested and paid out, and reporting/accounting. As the donor, you will decide whether the fund will pay out only the income, or income plus capital, and under what circumstances. You might want to be very specific or leave these decisions to the experience and discretion of the foundation. In the case of the Gina Wilkinson Award, we didn’t know how much would be raised, and therefore planned the agreement to provide flexibility to ensure that the award amount could always be paid. Sometimes these decisions result in a fund where the income and capital will be fully disbursed over a fixed number of years – say 10 to 20 years.
The second component refers to terms where the donor expresses their objectives and, sometimes, direction regarding the award process, i.e., amount, selection, frequency, recipients and so forth. This is the place for the donor to set out―almost like a letter of wishes―the practical components of the administration of the award. It is then the ongoing responsibility of the foundation to make sure that the terms are properly followed and that the award always reflects the objectives and authority set out in the agreement.
The process is very much tied to the donor’s wishes, providing the protection, through the governance that the foundation brings overall, to make sure that their charitable intention is honoured.
Say an award is set up for $1,000 initially but in 5 years they find they can give $5,000. What is the process for changing some of that documentation
You wouldn’t have to change the legal agreement, as we would have incorporated flexibility in the terms and conditions to allow the amount of the award to be determined on an annual basis. In the case of the Gina Wilkinson Award, as the fund grows through fundraising and returns on investment, we might be able to approach Tom and say, the fund earned enough to support an award of $2,000 this year. What would you like to do?
What are the costs or fees involved in the process of setting up an award or scholarship?
We do recommend that a donor’s lawyer review the form and content of the trust fund agreement on their behalf. That is one cost, but the foundation does not charge any inception or set-up fees. The Ontario Arts Foundation charges a low administration fee (0.5% of the assets), plus investment management fees which are very cost effective.
Tom Rooney raised an important point when he said that the Ontario Arts Foundation adds legitimacy to the process of a group of people creating an award.
Yes, there are two important issues here. Firstly, when you are raising money for an award, it is a real benefit to be able to say that the funds will be protected and applied exclusively toward that purpose. Our strength lies in our fiduciary responsibility to receive, care for and safeguard funds for their designated purposes. That’s very important to many people and more reassuring than simply opening up a trust account at a bank, because you know that there is a third party watching to ensure not only that the money doesn’t go away, but that it is applied to the purpose for which it was intended.
Secondly, as a registered charity, we can issue tax receipts, whether the amount is $25 or $250. Everyone likes the connection of contributing to a fund that honours someone important to them, but it’s important to have a benefit on the tax-reporting side.
When the award comes up, we’re also happy to send out a personal communication, either from us or with a message from the person who set up the fund, thanking previous donors for their support, giving details of the initial award, and letting people know how they can continue their support if they so choose.
Under what circumstances can the OAF put together a jury, if you are not, like Tom Rooney, directly involved in the arts world?
If you are establishing an arts award where you want to recognize individuals, as opposed to organizations, we can help you set up a jury as a result of our strong relationship with the Ontario Arts Council. We can access an existing infrastructure to bring together juries of credible peers very efficiently.
To sum up then, the Ontario Arts Foundation lends credibility, infrastructure and administrative ease to the process of setting up an award or scholarship?
Yes, working with the Ontario Arts Foundation saves a lot of time and effort by putting the structure in place without your having to go to an accountant, lawyer or an investment manager to try to put shape around a memorial gift, at a time when you can least focus on those issues.