Building Endowment - 4 Ways to Build

January 2002

“Endowment:  funds or property donated to an institution, individual or group as a continuing source of income.”

This dictionary definition resonates immediately with all not-for-profit organizations.  To have regular, ongoing income for programs and projects that is not consumed and does not have to be raised anew each year is an inviting goal for budget building and program stability.  Are you making endowment building a high priority in your fundraising plans?

WHAT IS ENDOWMENT?

Gifts given with the stipulation from either the donor or the receiving organization that only the income or a designated percentage of the principal can be spent annually.  The corpus therefore is never consumed but “keeps on giving” year after year”.

WHAT ARE THE BENEFITS OF AN ENDOWMENT?

·     Continuity and permanence of a program or operation.  Assured income gives comfort to both the donor and the organization that a worthy program or project is not as much at risk when it is less dependent on the whims of annual giving each year.

·     Growth of the endowment.  Over an extended period of time endowments invested should bring returns in excess of the four to six percent spending policy, thereby increasing the endowment and increasing the money available each year to be spent from the endowment.

·    Budget planning.  With some assured income from endowment earnings, annual budgets are both easier and safer to build since they are less dependent on annual new dollars that must be raised to balance expenses.

FOUR WAYS TO RAISE ENDOWMENT

1.    Establishing Named Funds. Because endowment funds are permanent funds, they are attractive vehicles to perpetuate the memory of or honor a loved one.  If you know your donor’s relationships, you can easily ask them to consider a naming opportunity.  For instance, a widow of a cancer victim could be approached about her interest in beginning a cancer research fund in memory of her husband.  A patient who thinks very highly of her physician could consider a named fund in his honor.  The solicitation flows naturally form the donor’s interests in perpetuating the name of a love one.

2.   Endowing Annual Gifts.  Making regular annual gifts permanent.  Loyal  donors who support a program of special interest to them may realize, with your assistance, that their favorite project will be at risk when they are gone.  To ensure its permanence in their name, an endowment gift in their lifetime or in their estate of $100,000, for example, would assure the continuation of their $5,000 annual scholarship in perpetuity.

3.   Planned Giving.  Endowment gifts are especially attractive in estate planning.  The donor thereby leaves a legacy that will not be consumed, but will be a continual remembrance and carry out the donor’s wishes for generations to come. 

4.     Campaigns.  In a capital campaign, an organization should include an endowment component.  This permits a new program or facility to have ongoing funding support year after year.

I close with a personal example that made an indelible impression on me on how endowment gifts can make a difference and leave a legacy, not only for decades, but for centuries.

In 1969-70 I was a visiting professor of history at Oxford University, England in the field of nineteenth-century English History.  My mentor at University College held an endowed chair in modern British History.  Do you know when that chair was endowed?  1483!  Nine years before Columbus dropped anchor in the Americas.  Talk about leaving a legacy that continues 500 years later to carry on the donor’s vision!  In non-theological terms, perhaps endowments are about as close as we can get to immortality and the good we can do lasting long past our lifetime.

Harold J. Schultz, Ph.D.

Senior Associate

The Moran Company