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Abstract

Continuity risk pertains to the potential disruption of business operations due to factors such as system failures, financial insolvency, and organizational dissolution. This risk is particularly critical for blockchain products, which are expected to be perpetually accessible. Ensuring the robustness and resilience of these systems is essential for delivering consistent services and maintaining donor trust.

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Policy: Stewardship, Access, and Successor Provisions

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Purpose

This policy outlines the measures Endaoment has in place to address continuity risks for Donor-Advised Funds (DAF). In the event of the sponsor’s insolvency, loss of charitable status, or cessation of operations, the policy ensures the ongoing stewardship of contributed capital. It safeguards fund advisor access and decision-making authority regarding charitable distributions and details provisions for transferring assets to a new qualified sponsor, including the criteria for selecting that sponsor.

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Stewardship of Charitable Assets

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Fund Security

Endaoment is committed to managing all assets within Donor-Advised Funds in strict adherence to fiduciary standards. If the DAF sponsor faces financial instability, insolvency, or regulatory threats (such as the loss of 501(c)(3) status), we will promptly notify the donor or their successor. This notification will outline the situation and the necessary steps to securely transfer the assets to another qualified DAF sponsor.

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Asset Protection Measures

In potential risk situations, the Board of Directors may request a third-party auditor to conduct a thorough due diligence review of the sponsor’s ability to manage the fund. This review ensures that any transfer of assets is secure and that all fiduciary responsibilities are maintained throughout the process, preserving the donor’s original charitable intentions without disruption.

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Notification of Transfer Events

Endaoment will notify donors or successor advisors at the earliest stage of a sponsor risk event. The notification will include detailed information on the timeline for transferring assets, the process for selecting new sponsors, and any necessary actions required by the fund advisor.

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Transfer of Fund to New Sponsor

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Conditions for Transfer

If the sponsor becomes insolvent or loses its charitable status, the fund’s assets will be transferred to a new qualified DAF sponsor through the following process:

  • Notice Period: A 60-day advance notice will be provided to the donor or successor advisor, detailing the reasons for the transfer, available new sponsor options, and steps to finalize the process.
  • Advisor Approval: Approval from the fund advisor or successor advisor is required to initiate the transfer. If there is an immediate threat to the assets, the transfer may proceed without prior approval, but the advisor will be notified immediately of the action taken.
  • Transfer Protocols: Asset transfers will be facilitated securely, ensuring that all relevant documentation and personal data are handled in accordance with our Personal Data Usage & Storage Policy.
  • Fund Abandonment: If the donor or successor advisor does not approve the transfer plan or does not select a new DAF sponsor or recipient charity, the Board of Directors will retain final discretion over the distribution of the fund.

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New Sponsor Selection Criteria

The new sponsor must meet the following criteria to ensure the continued effective management of donor-advised funds:

  • Public Charity Status: The new DAF sponsor must be a 501(c)(3) public charity in good standing with all relevant state and federal authorities.
  • Financial Stability: The sponsor should demonstrate financial resilience and a proven track record of managing donor-advised funds responsibly.
  • Transparency and Accountability: The sponsor must adhere to the highest standards of transparency in reporting, ensuring clear stewardship of charitable assets.
  • Consenting Steward of Prior Gifts: The sponsor must honor outstanding gift agreements and advisory relationships between the donor and Endaoment or the fund and a prior advisor.

Donors or their successors may recommend specific charitable organizations to receive distributions from the funds during the 120-day notice period. This provision ensures that the donor’s original charitable intentions are respected if the current sponsor is unable to continue managing the assets effectively or if the donor is dissatisfied with the new sponsor options.

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Operational Controls and Testing

Endaoment conducts regular testing and reviews of internal controls related to asset management, fund transfers, and compliance with fiduciary standards. The frequency of these reviews is determined by ongoing risk assessments. Outcomes from these tests inform improvements to effectively mitigate risks.