Like most well-worn tales, you can probably finish it yourself … along the road, community foundations expand their services and grow their assets…they also develop investment options for donors. Community foundations also develop relationships with multiple financial service providers (advisors, brokers, financial advisors) who want to support their clients’ charitable giving, but also want a role in managing client assets. And along this road of progress and growth, things begin to get complicated.

As the number of investment managers grows, the community foundation’s financial staff takes on more and more manual duties. For each investment manager, a new set of manual procedures are put in place (regardless of the size of the investment). Each new investment product requires new skills of the staff that manage them. Suddenly life is not so simple and, like the experience of the Sorcerer’s Apprentice, a trickle becomes a flood and things back up in the back office. Suddenly our tale turns into a CEO’s worst nightmare…

But, no more. Seamless processing to the rescue!

What is Seamless Processing?
In many ways, seamless processing is "the back office of the back office." By TSC definition, seamless processing is:

A seamless processing solution will allow community foundations to:

• Expand the number of investment managers with whom they work, supporting development strategies and meeting donor expectations
• Ease the stress on back office systems and staff
• Promote asset growth without exponential additions of staff

A seamless processing overview is shown in the graphic below:

Specifically, seamless processing will allow community foundations to:

• Automate accounting of the investment information through the core system
• Automate bank account reconciliation
• Provide donors with daily investment information by allowing intra-month unit pricing of investment pools
• Automate scanning of brokerage accounts to determine if gifted securities have been deposited

What is the TSC’s seamless processing solution?
The TSC has selected AST Trust Company to be the preferred provider of the field’s seamless processing solution. Community foundations that elect to participate in the seamless processing solution will contract with AST Trust to act as an intermediary to manage relationships with investment managers that interact with the foundation.

In this intermediary role (which is similar to but not that of a master custodian), AST Trust Company assembles the information from the ‘trust’ accounting conducted with each custodian, cleans and standardizes it, aggregates it and provides information to the ‘fund’ accounting needs of the foundation and its donors.

A community foundation can participate in the TSC seamless processing solution, maintain all existing investment manager relationships and also keep any master custodian relationships that exist. It will also be easy to add new investment manager relationships, as AST Trust Company has more linkages with more custodians and brokerage houses than can be found anywhere else in the country.

1. Automate the interface between trust accounting and fund accounting information
2. Prepare accounting entries in a way that foundation core systems can use the information in their fund accounting
3. Provide improved internal controls
4. And more! (i.e., bells and whistles we didn’t anticipate—or pay extra for!)

A description of each of the above components of the seamless processing solution is described below.

1. Automate the interface between trust accounting and fund accounting information

A major challenge in managing multiple investment managers is translating the information received from those managers (that operate a ‘trust accounting system’) into information needed by community foundations (that operate a ‘fund accounting system’). Fund accounting systems have no idea what a 'share' of a stock is, and trust accounting systems could care less where the money comes from (e.g. gift tracking) or where it goes (e.g. grants). The seamless solution has worked through these relationships.

Currently, foundations with multiple investment managers are handling this challenge manually. As new investment managers come on board with the foundation, the manual reconciliation balancing act gets more and more difficult. The seamless processing solution offered by AST Trust Company will put these translation actions into the hands of experienced professionals. With AST Trust Company acting as an intermediary, foundation staff will no longer be responsible for pulling together all the multiple source data from various investment managers, nor will staff need to reconcile data using actual investment statements produced by those custodians.

2. Prepare accounting entries in a way that foundation core systems can use the information in its fund accounting

To prepare entries, AST Trust Company will:

• combine custodians *
• conduct investment statement reconciliations *
• prepare investment entries
• conduct fund ledger reconciliation
• conduct investment account reporting *
• set up entries *

The starred items are currently services that AST Trust Company provides to existing customers. Others have been added to AST Trust Company core services specifically for community foundation needs.

Community foundations will be able to customize how these entries are calculated for your particular needs (i.e. how fees are charged and how custodians book them).

3.  Provide improved internal controls

In the past, controls that have relied on a paper trail experience great stress as the number of investment managers increases. The AST Trust Company seamless solution will deliver tools that:

• provide reconciliation of investment cash flow and;
• allow you to drill down to transaction level detail.

For example, when AST Trust Company provides an entry for income accruals, your staff will be able to drill down and see the corporate actions behind this activity. It will provide a powerful new ability—all easily retrievable for any investment manager’s work.

Foundations will be able to rely on data in the AST Trust Company system as an integral part of the audit trail. Key fund accounting information will be available from AST Trust Company, yet fund accounting information needed by foundations’ core systems (FIMS, FoundationPower or Blackbaud) will transfer over in the required manner.

4.  Bells and whistles (that we didn’t anticipate or pay for!!)

Because of the tested technology platform AST Trust Company brings to the table, other features are available to us—at no additional cost. These include:

• Performance reporting
  Staff and investment officers often need access to performance reporting on a particular investment, or for a major donor advised fund. Through AST Trust Company’s system, you will be able to look at specific actions behind each account and will also have access to graphs and graphics that make these come alive.

• Scanned investment statements
  There will no longer be any need to dig through hard copy files or search through a microfiche reader. Electronic investment statements (much like those you now get with your online banking) are available with a few mouse clicks.

• Online query capacity
  Have a question that needs to view data across custodians across time, or using a particular type of security? Powerful online query capacity will be available through AST Trust Company’s system. If your foundation makes socially responsible investments, for example, you’ll be able to search across all accounts to find the information you need—electronically and easily.

What else is required to use the TSC seamless processing solution?
To fully implement seamless processing, a complementary infrastructure improvement must be made to allow the AST Trust Company information to ‘talk to’ your core system. This requires that an Application Programming Interface (or API) be written to link the seamless processing solution to FIMS or FoundationPower. Through the Technology Initiative, simultaneous and carefully coordinated development is taking place to create these required linkages. (Blackbaud users will need to pay for some programming costs to develop this linkage for their systems.)

Once the seamless solution and the APIs are in place, community foundations will achieve the desired outcome: the ability to link investment management and custody information to their core system in a manner that is faster, more efficient and better able to handle growth than ever before.

What will this cost and at what asset level does it become cost-effective?
The fee for seamless processing declines as more assets from a particular foundation are included in the service. It starts at 4.5 basis points but has a minimal annual charge of $35,000. A small installation and configuration fee will also be required. The annual fees are estimated in the following:

Asset Size	Fee	bps
$50 million	$45,000	9.0
$100 million	$45,000	4.5
$200 million	$90,000	4.5
$500 million	$195,000	3.9
$750 million	$220,000	2.9
$1,500 million	$270,000	1.8