You Might Be Ready for An Endowment if …
The Ford Foundation’s document “A Primer for Endowment Grantmakers” presents a set of guidelines about endowment grant making and walks readers through issues such as whether an endowment makes sense, how the funds will be raised, how the endowment will be governed, how the fund will be invested and how its income will be used.
An endowment can benefit an organization by providing a reliable base of resources that can ease fundraising pressures and allow the organization to plan for the future. As the document states, “an endowment can create a sense of permanence that strengthens an institution and its stakeholders, enables increased attention to achieving long-range program objectives, and fosters programmatic flexibility in working towards those goals.”
However, endowments are not for every organization. Fundraising for an endowment is costly and time consuming, and is subject to produce less-than-stellar revenue if there is a dip in the economy.
The primer says that an endowment might be a good idea for an organization that has:
1. A history of outstanding performance and a proven ability to adapt to changing needs in its field over time;
2. Strong leadership and experienced management;
3. A history of at least one successful leadership transition and board succession;
4. An active and diverse board that factors largely in the governance of the organization;
5. Financial stability the past few years and income at least equaling expenses;
6. Fiscal accountability, with annual outside audits;
7. A diverse donor base;
8. A proven commitment from the board and staff members to creating an endowment;
9. Enough staff and resources to conduct an endowment campaign and manage an investment program while continuing to raise core and project support; and
10. The ability to raise matching support from other donors.
The Ford Foundation recommends an organization commission a consultant to conduct a management review, which will analyze the organization’s effectiveness at pursuing its mission, evaluate the level of fundraising expertise within the organization, and look at the organization’s fundraising oversight and governance structure. It also recommends a feasibility study be conducted to determine whether the community can support an endowment and whether enough income will be generated through the endowment effort to make it worth the time and resources the organization will have to put into building and managing it.