An Agency Fund Agreement (AFA) refers to a special type of endowment fund that is managed and overseen by a non-profit organization, usually a community foundation or a university foundation. Under an AFA, an organization or individual donates money to the fund, which is then managed by the agency or foundation, with the purpose of generating income that will support specific charitable causes.

The AFA is a highly effective tool in philanthropy, as it allows donors to support their preferred charitable causes for the long term, while still retaining a degree of control over how their funds are used. The agency or foundation that manages the AFA is responsible for investing the donated funds, and the income generated is then used to support the designated charitable organizations or causes.

As part of the AFA, a written agreement is drafted to lay out the terms and conditions of the fund. This agreement must comply with the policies of the agency or foundation that is managing the fund, as well as with any applicable laws and regulations. The agreement specifies the details of the donation, including the amount, the intended charitable purpose, and any restrictions or conditions on the use of the funds.

Some of the key components of an AFA include the investment policy, the payout policy, and the governance structure. The investment policy outlines the investment strategies and goals of the fund, including the types of assets that can be invested in, and the level of risk that is acceptable. The payout policy establishes the rules for how the income generated by the fund will be distributed to the designated charitable organizations or causes. The governance structure outlines the roles and responsibilities of the agency or foundation that manages the fund, as well as any advisory committees or other oversight mechanisms that may be established.

One of the main benefits of an AFA is that it provides donors with a high degree of flexibility and control over their charitable giving. Donors can make a tax-deductible contribution to the fund, and then work with the agency or foundation to identify the specific charitable organizations or causes that they would like to support. Donors can also choose to set up a named fund, which can be a powerful way to leave a lasting legacy and honor loved ones.

In summary, an Agency Fund Agreement is a powerful philanthropic tool that allows donors to support their preferred charitable causes for the long term, while still retaining a degree of control over how their funds are used. With careful planning and attention to the details of the agreement, an AFA can help donors make a meaningful difference in their communities and leave a lasting impact on the world.