NCUA ushered in a new charitable giving tool for federally chartered credit unions in 2013, and since then, many organizations have reaped the benefits of charitable donation accounts (CDA).
CDAs allow federal credit unions to take advantage of a wider range of investments than the agency typically permits, including equity and fixed-income portfolios, as well as other insurance-related options. The credit union must give at least 51% of any earnings to 501(c)(3) charitable organizations.
This capability enables a credit union to better engage with the local community, its members, and employees. By using a CDA and coupling behavioral dynamics into its strategy, a sponsoring credit union can increase its impact on its stakeholders.
Credit unions should customize their strategy to their resources and mission. Consider these four approaches:
1. Inch wide, mile deep. Making a large gift to a single entity makes a big impression. Recently, one credit union made a $1 million donation to a community library and agreed to contribute an additional $1.5 million during the next five years.
2. Mile wide, inch deep. Giving smaller donations to many organizations can broaden your impact. One credit union with a tradition of charitable giving in its community normally contributes more than $1 million per year to local organizations.
The credit union has effectively positioned itself as an integral community member among many groups of people. This strategy, and an effective operating model, has made the credit union a substantial player locally.
3. Double your money. Matching strategies can magnify a CDA’s impact. Credit unions might offer to match employee contributions up to the amount of available funds in the CDA.
To create even more engagement, the credit union could ask employees to select key charitable organizations on which to focus. The credit union also might want to encourage partnerships with charitable organizations with a mission that aligns with its strategic vision.
Finally, it might be beneficial to choose charitable organizations that serve the same population as the credit union’s membership base so the credit union can maximize its value within that target group.
4. Connecting with members. The sponsoring credit union could include both employee and member contributions toward the charitable donation match supported by the CDA. The credit union could promote this program through social media channels.
Engaging members and employees toward a mission that benefits the local community aligns with the credit union mission of people helping people.
To maximize the impact of a CDA, consider:
A carefully implemented charitable giving strategy can serve as an invaluable tool for your credit union to grow within its community.
If you would like to implement a CDA at your credit union, work with a knowledgeable, experienced partner and do your due diligence to ensure the program is right for you.