Episode #227
Could your endowments pose a problem?
In today’s video, Rhona Kwiram talks about three areas where many folks have gone wrong when creating an endowment fund and endowment policy.
If somebody came to you and wanted to start a special endowment, you might not think very hard about these three areas. But as you’ll see, just a little planning can go a long way to creating a lasting endowment without the headaches.
Rhona, by the way, is an accountant at one of the finest accounting firms here in Seattle, Clark Nuber.
If you have any stories or advice on creating endowments, please share them in a comment box under the video. Your nonprofit friends will appreciate it.
Also, if you’re not already a Movie Mondays subscriber, sign up for your own free subscription so you won’t miss out on future movies. Click here for Your FREE subscription to Movie Mondays.
For your own free subscription to Movie Mondays, click here.
Do you have any stories or advice on creating endowments? If so, please share them in a comment box. Your nonprofit friends will appreciate it. 🙂
This advice is well-intentioned, but it kind of misses the point.
The speaker references the small nonprofit on whose board she sat, which regretted having the funds locked up in endowments. She also references that “endowments will be there in a thousand years.” How many of our organizations really expect to be around in a thousand years? Very, very few. So why do we insist on setting up endowment funds for that term of years?
The only sure-fire matches for endowments, to my mind, are museums (established to protect and display the art or artifacts forever) and conservation organizations, which pledge to be stewards over conserved land forever. In most other cases, we’re trying to match a perpetual, inefficient funding source to an immediate crying need. It doesn’t work.
I think that for the vast majority of smaller nonprofits, it’s better to re-frame major campaigns in a way that will get the funds toward meeting the mission now, or over the next ten years. Creating an endowment is a great American tradition, and it’s very attractive to donors. It provides a sense of immortality. But it’s terribly inefficient and is costly to organizations by diverting them and their donors from gifts that would have more impact.
Or, to put it simply: better to invest in people than in markets.
Endowments are great… there is always the discussion about “needing current dollars” now, but still raise money for endowments! Why? You can put a “fee” on endowments for current operations, i.e. a .5% fee on earnings (once the endowment gets larger) or 10% of each endowment will be put into operations account.
Lastly, put a “changed conditions” paragraph in your agreements. So, if things change in the future, you can move the endowment payout to a “similar” or “related” purpose as determined by the CEO and the Board.
Call or email if you want to talk more… I love fundraising and its people!
Art Horne, FAHP, CFRE
501.707.4533
horne.ja@gmail.com
art-horne.blogspot.com
LOVE the ‘minimum’ suggestion – too many organizations have a dozen tiny funds and are spending more time managing/worrying about them than doing the work!
We have an account with our local Community Foundation.
Endowments could be paid to that account with the understanding that 1. we receive a yearly income for general purposes 2. if our organization ceases to exist the agreement with the Foundation is that the funds will be directed to the research into our cause at our provincial major university.
Endowments are wonderful sources of funding for nonprofits. Offering donors choices, i.e. current giving, endowment giving, planned giving, etc. should be included from the inception of every organization. The Founders of a nonprofit tend to be very passionate about the nonprofit and are the most likely suspects to make a planned gift, and every nonprofit should have a plan for accepting large and complicated gifts. That being said, very few nonprofits have the expertise to effectively administer their own endowment program. Nonprofits should strongly consider utilizing the expertise of their local community foundations which ensures their donations willl be efficiently and effectively administered. In addition, the variance power of the Community Foundation addresses the issues brought up about needs of the community changing over time. There will always be a varieity of needs in all our communities. Having endowments increases our ability to be able to respond to those needs.
We are a very small Non-Profit Organization for Developmentally Delayed Adults.. We provide activities to improve their independence in the community.
We have been blessed with an endowment from a Community Giving Foundation.
I was not aware that it needs to be for a certain purpose or a general purpose. I am going to look into this more after seeing this Simple Video,but never the less a very good one.
Thanks for the info.
Looking forward to more of your Videos next Monday.