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Donor-Advised Funds Glossary

View a list of Donor-Advised Glossary Terms below:


Accounts Payable: Money owed by a company to a creditor for goods purchased or services rendered.

Accounts Receivable: A request for payment (typically in the form of an invoice) made by a company or organization that rendered services or goods to a customer.

Advisory Board: A group of individuals that offers non-binding advice to an organization, usually in the realm of marketing, sales, financing, expansion, etc. The individuals do not have the authority to vote on corporate matters within the organization, however.

Affinity Group: A group formed around a shared interest or common goal, whose purpose is primarily non-commercial and to which individuals formally or informally belong.

AGI: “Adjusted gross income” in the US tax system, which refers to an individual’s total taxable income or earnings minus any specific deductions for which one is eligible.

Alternative Strategies: A broad classification of investments that includes any investments which are considered less traditional or nontraditional (traditional investments consist of stocks, bonds, exchange-traded funds and other pre-packaged products). Alternative investments include venture capital, private equity, hedge funds, real estate investment trusts, and commodities as well as real assets such as precious metals, rare coins, wine, and art. These assets usually perform with low correlation to stocks and bonds, may be difficult to value, and are generally more illiquid than traditional investments.

Arbitrage: A financial strategy or transaction that seeks to profit from a perceived price differential through the simultaneous buying and selling of securities, currency, or commodities in separate markets or in derivative forms.

Articles of Incorporation: A set of formal documents filed with a government agency to legally document the creation of a corporation. This is the first legal step in forming a nonprofit corporation. Here’s an example of articles of incorporation.

Asset: Cash, stocks, bonds, real estate, or other holdings of a foundation that have economic value. Generally, assets are invested and the income is used to make grants.

Asset Allocation: Distributing investments among different asset classes (e.g. stocks, bonds, and real estate) to find the optimal risk/reward mix. Tactical asset allocation implies a relatively short-term, and strategic asset allocation a longer-term, approach.

Asset-Backed Security: A fixed income instrument that is backed by a group of collateralized, typically illiquid, assets which pay interest, such as consumer credit cards and automobile loans.

Audit: An examination of the financial records, accounts, business transactions, accounting practices, and internal controls of a charitable nonprofit by an independent auditor. Here’s an example of an Audit.

Available to Spend: The immediate funds that are available to an organization.


Basis Point: One one-hundredth of a percentage point.

Benchmarks: A tool nonprofits use to determine how well their organization is performing relative to external peers or to other sites in their network. The goal is to identify the best practices, solutions, and opportunities to adopt. Here’s an example of a benchmark.

Beneficiary: A person or entity, such as a nonprofit organization, that receives money or other property from an estate. Beneficiaries are listed in a will, and the money they receive may come from a life insurance policy, retirement account, or other kinds of assets.

Bequest: A gift or donation, usually in the form of a sum of money with few or no conditions specified, made available upon the benefactor’s death.

Block Grants: A type of mandatory grant where the recipients have substantial authority over the type and designation of supported activities, with minimal federal administrative restrictions. The basic premise is that states or other recipients should be free to target resources and design administrative mechanisms to provide services that will meet the most important needs of their citizens.

BMF: Business Master File; the cumulative list of the Internal Revenue Service which includes information on the over 1.6 million registered nonprofit, tax-exempt organizations in the US.

Board of Directors: A group of individuals that are elected as, or elected to act as, representatives of the organization’s supporters in order to establish management-related policies and to make decisions on major company issues.

Bonds: Evidence of a debt on which the issuing company usually promises to pay holders a specified amount of interest for a specified length of time and to repay the principal on the maturity date. A bond represents debt and its holder is a creditor of the corporation and not a part owner as is a shareholder

“Bricks-and-Mortar”: An informal term indicating grants for buildings or construction projects. *Or, “a business that operates conventionally rather than, or as well as, over the internet.”*

Bylaws: Rules governing the operation of a nonprofit corporation; they often provide the methods for the selection of directors, the creation of committees, and the conduct of meetings. Here’s an example.


CAGR: Compound Annual Growth Rate; the mean annual growth rate of an investment over a specified period of time longer than one year. To calculate CAGR, divide the value of an investment at the end of the period in question by its value at the beginning of that period, raise the result to the power of one divided by the period length, and subtract one from the subsequent result.

Capital Gain: Profit on the sale of an investment, which may include common stock, corporate and government bonds, real estate and other real assets. There are long- and short-term capital gains.

Certificate of Deposit: A certificate issued by a bank to a person depositing money for a specified length of time.

Charitable Remainder Trust: A tax-exempt irrevocable trust composed of the assets that remain after a specified amount has been dispersed to the trust’s beneficiaries. The assets eventually pass to a qualified charity. The present value of the charitable remainder is equal to the charitable tax deduction.

Collaboration: Two or more organizations coming together to accomplish a specific goal. Organizations involved in collaboration remain independent with full decision-making power, but share resources with each other in order to further the profit of both. By various groups working in a similar field but each tackling a slightly different aspect, it allows the organizations to address multifaceted issues that are larger than any one of their particular missions, and achieve a broader purpose than could be accomplished alone.

Common Stock: Securities that represent an ownership interest in a corporation. A common stockholder is not a creditor of the corporation, so he or she assumes greater risk than does a creditor, but shares in earnings and growth through dividends and price appreciation. In the event of liquidation, common shareholders have rights to a company’s assets only after the bondholders, preferred shareholders, and other debtholders are paid in full.

Community Foundation: Community Foundations like the Rancho Santa Fe Foundation are dedicated to improving the lives of people and organizations within their respective communities. They bring together the financial resources of individuals, families, and businesses to support effective local nonprofits. The organized, collaborative principle of these foundations is that donors can create greater impact together than they can individually.

Community Impact Fund: RSF Foundation’s organized community program which makes annual appeals to the general public for funds that are usually not retained in an endowment, but are instead used for the ongoing operational support of local agencies.

Component Fund: Community foundations are allowed to treat all funds within their control as part of a single corporation, rather than a separate trust or association. This gives them administrative and investment advantages over private foundations.

Convertible Bond: A bond or preferred stock that can be turned into common stock at a predetermined conversion rate, frequently at predetermined times. Conversion is often forced by the bondholder by calling the bond or preferred stock prior to its maturity.

Corporate Bond: A fixed income security or debt obligation issued by a corporation to fund capital improvements, expansions, debt refinancing, or acquisitions, usually with a term in excess of five years. Interest is subject to federal, state, and local taxes.

Cost Basis: The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends, and return of capital distributions. This value is usually used to determine the asset’s capital gain, which is equal to the difference between the asset’s cost basis and the current market value.

Counterparty: The other participant in a foreign exchange, swap, financial transaction, or other derivative instrument. Every transaction must have a counterparty in order for the transaction to go through; i.e., every buyer of an asset must be paired with a seller who is willing to sell and vice versa.

Credit/Counterparty Risk: The possibility or potential risk that one of the involved participants (counterparty) does not fulfill their obligation, thereby resulting in a financial loss for the transaction.

CREF: The Charitable Real Estate Fund (CREF), which gains public charity status by virtue of its affiliation with the Rancho Santa Fe Foundation, is managed by a separate board of directors comprised of local leaders in the real estate profession, who may also serve on the RSF Foundation’s board of directors. The CREF Board oversees the process that converts commercial and residential property into charitable dollars. Each potential gift of real estate is unique and will be evaluated on a case-by-case basis according to the policies and standards set forth herein.


DBA: “Doing Business As.” A fictitious name (or assumed name, trade name or DBA name) is a business name that is different from your personal name, the names of your partners, or the officially registered name of your LLC or corporation.

Deferred Revenue: Also known as unearned revenue. Refers to an amount that was received by a company in advance of earning it, for products or services that are to be delivered in the future. As the product or service is delivered over time, it is recognized as revenue on the income statement.

Derivative: A contract between two or more parties whose value is based on an agreed-upon instrument or financial asset (typically a bond, market index, stock, equity, currency or commodity).

Dividend: A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, shares of stock, or other property. Here’s an example of a dividend in our smple fund statement.

Discretionary [Fund]: Grant funds distributed at the discretion of one or more trustees, which usually do not require prior approval by the full board of directors. The governing board can delegate discretionary authority to staff.

Donation: Amount that a donor and/or organization gives to a fund, either when establishing the fund or adding money to it. The terms ‘contribution’ and ‘gift’ can be used interchangeably here. Note: refer to ‘grant’ if looking for a definition for monies that come from the Foundation to support nonprofits.

Donee: The receiving organization of a donor’s resources. Can be used interchangeably with ‘grantee.’

Donor Advised Fund: A fund held by a community foundation or other qualified sponsoring organization where the donor, or a committee appointed by the donor, may recommend eligible charitable recipients for grants from the fund. The foundation’s governing body must be free to accept or reject the recommendations.

Due Diligence: The investigative steps voluntary and community organizations take to assure that an action is in the best interests of their organizations and beneficiaries.


EAFE: An unmanaged, market-value weighted index created by Morgan Stanley Capital International to measure the overall condition of overseas markets. It serves as a benchmark of the performance in major international equity markets as represented by Europe, Australia, and Far East. This international index has been in existence for more than 30 years.

EIN: Employer Identification Number. A unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities for the purposes of identification. Every IRS-designated tax-exempt nonprofit organization has its own EIN.

Endowment: The principal amount of gifts and bequests that are accepted by a foundation, subject to a requirement that the principal be maintained intact and invested to create a source of income for the foundation. Donors may require that the principal remain intact in perpetuity, or for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose.

Ethics: Many nonprofit organizations choose to craft a Code of Ethics statement, or a set of principles to guide the organization’s decision-making and activities, as well as the behavior of its employees, volunteers, and board members. The purpose of adopting such a statement formally is to provide employees, volunteers, and board members with guidelines for making ethical choices and to ensure that there is accountability for those choices.

Equity: In general terms, equity is the value of an asset less the value of all liabilities on that asset. More specifically, it is the total ownership interest in a company, of all common and preferred stockholders.

Excise Tax: Private foundations are subject to an annual 2 percent excise tax on their net investment income. The tax is reduced to 1 percent in any year in which the foundation’s percentage of charitable distributions exceeds the average percentage of its distributions over the previous five taxable years.

Expenses: The organization’s financial outlay for the tax period.


Fair Market Value: The price that an individual interested in buying a given asset would pay to an individual reasonably interested in selling it for the purchase of the asset or that the asset would fetch in the marketplace. To establish FMV, it must be assumed that prospective buyers and sellers are reasonably knowledgeable about the asset, that they are behaving in their own best interests, that they are free of undue pressure to trade, and that a reasonable time period is given for completing the transaction. Special IRS rules apply to the valuation of charitable gifts.

Fiduciary: A person, committee, or institution that holds assets in trust for another. The property may be used or invested for the benefit of the owner, depending on the agreement.

Fiscal Year: A 12-month period for which an organization plans the use of its funds. This period may be a calendar year but can be any 12-month period. A fiscal year accounting period should normally coincide with the natural operating cycle of the organization.

Fixed Asset: A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year’s time.

Form 990: An annual document used by approximately one-third of all public charities to report information about their finances and operations to the federal government. The form lists organization assets, receipts, expenditures and compensation of officers for that fiscal year. Here’s an example

Foundation: An entity which exists to support a charitable institution and which is funded by an endowment or donations.


Government Bond: A security issued by a federal, state, or city government to support government spending. Since default is unlikely, government bonds are generally considered risk-free.

Government Grant: Payments from the government to a nonprofit organization to further the organization’s public programs. Over 26 federal agencies administer more than 1,000 grant programs annually to provide funding for the arts, educational institutions, agricultural projects and more.

Grant: An award of funds or financial assistance to an organization or individual to undertake charitable activities.

Grantee: The individual or organization that receives a grant.

Grantor: The individual or organization that makes a grant. Can be used interchangeably with the term ‘donor.’

Growth Stock: A share or stock in a company whose earnings are expected to grow at an above-average rate relative to the market and have done so in the past. A growth stock usually does not pay a dividend.


High Yield Bond: A high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds, and municipal bonds. Because of the higher risk of default, these bonds pay a higher yield than investment grade bonds.


Impact Investing: Investing in projects, companies, funds or organizations with the express goal of generating and measuring mission-related economic, social or environmental change alongside financial return.

Index: A statistical measure of the changes in a portfolio of stocks representing a portion of the overall market.


Junk Bonds: Also known as a high yield bond. A lower-quality rated bond (rated BB or lower by Standard & Poor’s and Ba or lower by Moody’s) is called high yield because the interest rate is higher than average to compensate investors for taking higher-than-average risk.


Legacy: The gift that an individual leaves, both in the details of their will and in the tradition of giving they shared with their descendants.

Letter of Intent: A grantor’s statement indicating intention to make a specific gift.

Letter of Inquiry: A brief letter outlining an organization’s activities and a request for funding sent to a prospective donor to determine if there is sufficient interest to warrant submitting a full proposal. This saves the time of the both prospective donor and the prospective applicant. Also referred to as a ‘query letter.’ Here’s an example of a letter of inquiry

Leverage: A method of grantmaking practiced by some foundations, where a small amount of money is given with the express purpose of attracting funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds. Also referred to as the ‘multiplier effect.’

Liability: An organization’s financial obligation or debt.


Marginal Tax Rate: The income tax rate at which the last dollar of your income is taxed. The marginal tax rate for an individual will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings, and under federal law, you often pay a lower tax rate on your first dollar of taxable income than you do on your last dollar.

Marketable Securities: Publicly traded securities, such as stocks, bonds or notes, which are easily bought and sold in the marketplace and readily convertible to cash.

Mission: The main purpose for which an organization exists.

Mutual Funds: An investment company or trust in which a number of investors pool their funds and receive units in the fund that are priced daily. There are many types of mutual funds: stock funds, bond funds, money market funds, and closed- and open-end investment funds. Participants in these funds also cover a wide range of investors (individuals, pension funds, and trust funds).


NASDAQ: The second largest American stock exchange, created by the National Association of Securities Dealers (NASD) to enable investors to trade on a faster, computerized system. The Nasdaq Composite is an index of the roughly 3,000 stocks listed on that Nasdaq Exchange, many of which include the world’s leading tech companies.

Non-endowment: Non-endowment funds have no permanent principal balance and are immediately available for grant distribution.

Nonprofit Organization: Any organization whose purpose is something other than making a profit; the organization is often dedicated to furthering a particular social cause or advocating for a particular point of view.


PAC: Acronym for Professional Advisory Council. Individuals who assist in planning and executing charitable giving through providing information on giving options according to one’s specific financial situation. Types of professional advisors include: attorney, accountant, estate planner, financial planner, stockbroker, insurance broker, planned giving officer, philanthropy consultant.

Parity: Equality, as in amount, status, or value. Parity in philanthropy is the equal participation by spouses or other family members in allocating charitable dollars and in receiving the satisfaction and recognition of their contributions.

P/E Ratio: Price/earnings ratio. The price/earnings ratio of a stock is calculated by dividing the current price of the stock by its trailing 12 months’ earnings per share. The P/E ratio relates the price of the stock to the per-share earnings of the company. High P/E generally indicates that the market is paying more to obtain the stock because it has confidence in the company’s ability to increase its earnings.

Philanthropy: The concept of voluntary giving by an individual or group to promote the common good. It also commonly refers to grants of money given by foundations to nonprofit organizations. Philanthropy addresses the contribution of an individual or group to other organizations that in turn work for the causes of poverty or social problems, improving the quality of life for all citizens.

Philanthropist: An individual or a group that contributes to other organizations that in turn work for the causes of poverty or social problems, thus improving the quality of life for all citizens.

Pledge: A promise to make future contributions to an organization. Some donors make multi-year pledges, promising to grant a specific amount of money each year.

Portfolio: The combined holdings of multiple stocks, bonds, commodities, real estate investments, cash equivalents, or other assets by an individual or institutional investor. The purpose of a portfolio is to reduce risk by diversification.

Preferred Stock: A class of ownership, or stock, in a corporation that has a higher claim on its assets and earnings than common stock. Preferred stockholders are usually entitled to dividends at a specified rate before payment is made to common stockholders, and they usually have priority if the company is liquidated; however, preferred stockholders generally do not have voting rights.

PRI: An investment by a foundation that is not in the form of an outright grant and serves to accomplish a charitable objective for a project related to the foundation’s purposes or interests. Once an investment is determined to be program-related, it is considered a qualifying distribution and counts toward satisfying the foundation’s 5% payout requirement.

Private Equity: Equity capital that is invested directly in a private company , and is not noted on a public exchange.

Private Placement: The sale of securities (including interests in commingled funds) to a relatively small number of select and qualified investors as a way of raising capital. A private placement does not require registration with the SEC and is not offered to the public. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds.

Professional Advisor: An individual who assists in planning and executing charitable giving through providing information on options according to one’s specific financial situation. A professional advisor may serve as advisor to the donor (focusing on protecting and achieving the donor’s best interests), advisor to the charity (focusing on the charity over the donor), fiduciary (volunteering time and putting the charity’s interests first), or as vendor (focusing on company profitability).


Real Property: Fixed property; primarily land, including land improvements, and structures or buildings.

Restricted Stock: Unregistered shares of stock held by company insiders or affiliates (such as executives and directors) that are subject to certain limitations. It is non transferable and must be traded in compliance with special SEC regulations. Restricted stock typically becomes available for sale under a graded vesting schedule that lasts several years.

Return: The gain or loss of a security in a particular period. The return consists of the income and the capital gains relative on an investment, and it is usually quoted as a percentage. The general rule is that the more risk you take, the greater the potential for higher returns and losses.

Revenue: The annual total yield of all sources of income for the organization, before costs and expenses are subtracted.

Risk Management: The forecasting and evaluation of financial risks associated with transacting business or investments, and the identification of necessary procedures that will avoid or minimize the impact of those risks.

ROI: Return on investment. A gauge of an investment’s profitability, used to evaluate its efficiency or compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment’s cost. Here’s an example of a return


S&P 500: An American stock market index composed of 500 stocks, selected by the Standard & Poor’s Corporation, that are seen as a leading indicator of U.S. equities and a reflection of overall performance of the entire market. Here’s an example of our S&P 500

Scholarship Fund: A fund established to provide scholarships to students who meet specific criteria as determined by the donor. Donor advised scholarship funds allow the donor (or a committee specified by the donor) to make scholarship decisions, while the community foundation makes that decision for restricted scholarship funds.

SEC: Abbreviation for Securities and Exchange Commission, an agency created by Congress to regulate and maintain efficient markets, facilitate capital formation, and protect the investing public.

Socially Responsible Investing: Also called ‘social investing,’ the practice of aligning a foundation’s investment policies with its mission. This may include making certain program-related investments and refraining from investing in corporations with products or policies inconsistent with the foundation’s values.

Stewardship: The process by which a nonprofit organization develops a stronger relationship with the donor through regular communication, starting from the time of the first gift and lasting until that donor no longer has a connection with the organization.

Stock: (See equity). A type of security that signifies ownership in a corporation and represents an investor’s claim on part of the corporation’s assets and earnings.

Sustainability: Institutional policies and practices that attempt to meet the material needs of present generations of users, without compromising the ability of future generations to enjoy a similar standard.


Tax Exempt Organization: A nonprofit organization that does not have to pay state or federal income taxes. Any organization seeking recognition of its status as tax-exempt must apply to the IRS and may have to fulfill additional state applications or registration requirements. Charities may also be exempt from sales and local property taxes.

Testamentary Trust: A trust which arises upon the death of its executor, and which is specified in his or her will. A will may contain more than one testamentary trust, and may address all or any portion of the estate. The will must be probated to bring the trust into existence.

Tithe: 10% of funds or some other contribution given back to an individual’s place of worship, a practice observed by many different faiths.

Trust: A legal device used to set aside the money or property of one person for the benefit of another person or organization. Typically this means that a person transfers assets to a trust, which, for tax purposes, is a separate legal entity.

Trustee: The person(s) or institutions responsible for the administration of a trust.


Value Stock: A stock that is considered to be a good stock at a price lower than that of its peers. Generally, these stocks are contrasted with growth stocks that trade at high multiples to earnings and cash.

Venture Capital: Funds invested in a substantially high-risk enterprise or project that is not large or mature enough for its shares to be publicly traded, typically a new or expanding business.

Vision: An organization’s vision statement is often a supplement to the mission statement and presents a description of the world as it would exist if the organization were to succeed in achieving its highest aspirations and goals.


Yield: The income return on an investment or a security, typically in the form of interest or dividends. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market value, or face value.

Yield to Maturity: The total return anticipated on a bond if the bond is held until its due date and all payments are made as scheduled, including interest payments and price changes. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.


501c3: The most common type of tax-exempt organization in the US. A nonprofit organization is included in this category (and exempt from federal income tax) if its purposes are: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.

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Rancho Santa Fe Foundation donors support causes around the world. Worldreader provides e-readers to students in many countries to expand literacy and economic opportunity.

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