Is Your Organization Endowment Ready?

An endowment is an organization’s key to a more secure financial future. Endowment funds are invested for future needs, but can also provide a steady revenue source today.

There are no firm criteria to determine if your organization is ready to establish and build an endowment. However, it is important to conduct an organizational self-assessment to help you make this decision. Here are the most important considerations.

Fundraising

Creating an endowment begins with staff who are dedicated to building resources for the organization, including the endowment.

  • Does your organization have competent, qualified fundraising staff to help plan and execute fundraising programs and support volunteer fundraisers?
  • Are there professional development dollars in your budget to support your fundraising staff in acquiring skills to solicit planned and endowment gifts?

Leadership

Successful endowment building begins with the commitment of the board and staff. They must believe establishing and building an endowment is a priority for the organization. Further, the leadership should be stable, knowledgeable and have the time and talent to participate.

  • Does your senior management and board support the building of an endowment?
  • Do they have an active role in the fundraising process?

Strategic Plan

The organization should have a clear mission and a history of gaining and building support for it.

  • Does your organization have a written strategic plan to guide its course over the next three to five years?
  • Have your board and committee members committed themselves to meeting the financial needs of the plan, which must come through fundraising?

Development Plan

A comprehensive and long-range development plan to generate broad support from the community is a fundamental building block for an endowment.

  • Does your organization have a compelling case for financial support from the community?
  • Does it have a comprehensive annual and long-range development plan?
  • Does your development plan include building an endowment?
  • Is there broad-based support from the community?

Financial Health

A balanced operating budget is essential to overall financial health. Organizations that are consistently operating at a deficit should undertake steps to balance the budget prior to planning and raising funds for an endowment. Endowment donors want to know that your organization is meeting current/operating needs.

  • Has your organization been financially stable for multiple years?
  • Are there any estimated shortfalls or volatility in traditional revenue items?

Donor Capacity

It is often the donors closest to your organization who will consider a gift to an endowment, whether it is a gift during their lifetime or an estate gift.

  • Does your organization have major donors who are committed to your mission?
  • Do you have a significant loyal donor base?

Research Tools

Knowing the capacity and inclination of potential and current donors is important for predicting endowment support.

  • Do you have a prospect research program to help identify potential givers?
  • Is your organization acquiring new donors who might support an endowment in the future?

Endowment Strategy

It is important to develop a long-range strategy for how you would use a sustainable resource like an endowment.

  • Do you know how distributions from an endowment could benefit your organization over time?
  • Do you have a plan to launch and build the endowment?

Planned Giving Program

Estate plans support endowment-building strategies. As described later in this guide, planned gifts are a common option for building your endowment program.

  • Does your organization have an established planned giving program or the support to start one?
  • If yes, has your organization considered the establishment of a legacy society to effectively steward those who have included you in their estate plans?

Communications/Marketing

Building an endowment requires that donors are aware of the fund and the role it serves in helping your organization build for the future.

  • Does your organization have a communications plan to build the pipeline of donors, steward them and maintain their interest and involvement in your organization?
  • Is there a written case for support?

If your organization is not yet ready to establish and build an endowment, consider which areas need bolstering. Then create a plan to prepare to successfully build for the future needs of your organization and the community you serve.


Frequently Asked Questions

What is an organizational endowment fund?

An organizational endowment, or agency fund, is a fund established by a nonprofit organization to ensure its long-term fiscal health. An endowment can be created with donations and/or assets under the control of the organization’s governing body.

When an organization places an endowment with Community First Foundation, which entity is the legal owner of the funds?

Community First Foundation is the legal owner of the funds. All funds entrusted to the Foundation are subject to the Bylaws of the Foundation. According to the Bylaws, the Board of Directors, as the governing body of the Foundation, controls all funds.

Who controls the use of the income from the fund?

The governing body of the agency may use the income for any purpose. The fund purpose outlines the use of distributions from the fund. Sometimes an organization establishes a fund with a specific purpose, such as building maintenance or continuing education for employees. In such instances the income is restricted to the specified designation and the organization will be required to certify the use of the funds to the Foundation.

Community First Foundation materials indicate that organizational endowments should be considered permanent endowments. Is this correct?

Yes. A fund established by an organization that is also the recipient of distributions of that fund must be a permanent endowment. Otherwise, the fund could be considered a vehicle for short-term investments.

 

Source: The Foundation for Enhancing Communities 6/2005