Building an Endowment Takes Trust
Around 2000 and 2001, the St. Louis Symphony Orchestra realized it had been losing money and that its fundraising efforts weren’t making ends meet. As Randy Adams, SLSO’s president and executive director says, “All the cookie jars were bare, and we were facing bankruptcy.” At the request of some major donors, the organization instituted some major changes to its fiscal management.
One such change was the commencement of a five-year effort to raise SLSO’s endowment as a way to strengthen its financial base. In terms of its economic structure, ticket sales represent roughly 35 percent of the orchestra’s revenue, annual giving accounts for 20 percent to 25 percent, and the rest comes from its endowment.
Adams says an endowment is the hardest money to raise. Unlike a capital campaign, where an organization raises money to build something that donors can put their name on, or an annual giving fund that donors often give to out of a sense of loyalty to an organization’s programs and mission, endowments are less tangible in people’s minds.
“The money that comes in for annual giving goes immediately to current operations. An endowment is basically a savings account in perpetuity from which you draw the interest and earnings, so to speak,” Adams says.
It also can be challenging to get donors to give to both the annual fund and the endowment. There often is the fear that you’re robbing Peter to pay Paul. The goal is to get annual-fund givers to give to the endowment above and beyond their annual gifts, as opposed to splitting it or diverting a portion of the amount they give yearly.
To raise its endowment in the wake of financial troubles, Adams said the organization had to regain the trust of the community. SLSO put together a plan that involved the orchestra cutting 25 percent of its budget by 2002. It also created a separate 501(c)3 organization to manage its endowment. Three of the seven trustees of the endowment must have no prior relationship with the orchestra. Bylaws were put in place that prevent SLSO from invading or borrowing from the endowment.
“All of those things collectively have helped us regain the trust of major donors so they can be assured that the endowment will be there for future generations,” Adams says.
Five years ago, SLSO’s endowment was $18 million; today it is $125 million. Adams say it’s important, when trying to get donors to give to the endowment, to connect them to the mission and demonstrate a real need for the endowment. At the same time, it’s crucial to demonstrate sound fiscal management and show that the endowment is protected for the long term, i.e., the organization won’t raid it in times of need. Setting up a separate 501(c)3 with outside trustees was in important step in SLSO’s effort to grow its endowment.
Randy Adams can be reached via www.slso.org