ALEXANDRIA, Va. – Under NCUA's incidental powers rule, federal credit unions may establish non-profit charitable foundations to support causes within the community, according to legal opinion letter 04-0133 from NCUA. Creating charitable foundations "to provide an institutional structure for its charitable giving and to facilitate long-term charitable objectives in the community" falls under incidental powers, according to NCUA Associate General Counsel Sheila Albin. The attorney making the request for a credit union client explained to NCUA that the federal credit union would provide the seed money and future funds for the foundation as permitted by its board of directors. "By creating a nonprofit charitable foundation, an FCU can charter a foundation focusing specifically on the FCU's charitable goals, while promoting the FCU's name in the community and generating goodwill," Albin wrote. This arrangement may subject the FCU to operational and reputation risks, including conflicts of interest and self-dealing concerns. "NCUA expects an FCU to provide information about and access to records of the foundation as necessary to ensure that the operations of the foundation comply with applicable law and do not impair the integrity of the FCU's operations," she wrote. "As such, NCUA may ask to review the foundation's policies, assess the adequacy of controls, and verify its financial statements or annual reports to determine the degree of risk the foundation may pose to the FCU." Albin added, that the foundation will have to maintain its tax-exempt status and a separate corporate existence. The credit union's board must also ensure that a majority of the credit union's directors do not serve on the foundation's board as well so the remaining directors could approve any contributions to the foundation, including the sharing of employees. "Otherwise, conflicts of interest issues arise if FCU directors vote to authorize donations to a foundation for which they serve. See FCU Bylaws, Art. XVI, Section 4," Albin wrote.