Endowment: For Today or Tomorrow

Many of us have had to make hard decisions in order to survive these past five years. Some have had to take money from a retirement account to pay for daily living expenses, a decision with enormous repercussions. But, sometimes you have to make difficult decisions.

The same is true for non-profits. While fundraising is rebounding for many organizations across the country it is not rebounding for all. Many are still contemplating lay-offs and reductions in services, classes, programming and advocacy. Some with endowments or reserve funds are considering using those funds to cover operating expenses. Some who raised funds for a specific purpose are now considering using those funds for operations.

These are tough decisions and we have great empathy for those sitting on boards who are considering such “options.”

If you are in this situation, we offer a word of caution. Formal endowments can be board restricted. Before your board votes to change restrictions in order to allow the organization to access needed capital, think about what it took to build that endowment and how your actions may affect future endowment fundraising efforts. While your challenges are immediate, your constituents’ memories are long. Gifts to endowment typically represent the largest and most meaningful gift an individual will make. They are often made to secure an institution “in perpetuity.” If the endowment is “raided” now, how does a potential donor know her gift won’t face the same future?

Likewise, if you have a “reserve fund” consider what was communicated to donors when you asked for their help building this reserve.  Was it built for a time like today? If so, use it! If not, think about what it means to use funds for a purpose that is different from what you solicited them for. This is even more critical if your board is considering using funds raised for a building, or new initiative to pay for operations. The betrayal of trust can last for years and may take more effort than your current or future boards will ever have.

If you want to avoid this situation, we offer a word of encouragement. Do what you can to meet your operating costs and simultaneously create an organization-wide culture of fundraising. Engage your board in giving and asking others to give. Diversify your fundraising, thank your donors, and engage leadership-level volunteers. Cultivate current and prospective donors long before you ask for a gift, and long after you receive one. Employ the prerequisites for fundraising success. If you don’t know what these are, write to us at news@saadandshaw.com and we will send you a list to focus your work.

If you can, avoid decisions that provide short term gain and long term pain.