The Mikuska Group  

Why endowments don’t make sense for every non-profit

So, you’re on the board of a non-profit that is looking to create stable funding for the organization. You’ve heard that endowment funds are a good way to ensure ongoing revenue, in fact, in perpetuity. Sounds pretty good, right? “Let’s start an endowment fund campaign!”

Well, not so fast. There are circumstances where endowments – funds that grow and provide interest income – make sense, and others where they don’t. Consider:

  • While building up endowment funds, are you creating future stability at the cost of offering service in the short term?
  • Will focusing on major gifts for your endowment impede your ability to ask for gifts for your current needs?
  • Are you ready to manage a portfolio subject to the ups and downs of the market?

The case can be made for long-term stable funding from donors where an amount that might otherwise be placed into endowment would instead be spent over a period of time, say 10 years. The advantage here is that the donor is likely to be involved and see the gift in action, and in fact may be willing (or their company or their family after them) to continue the relationship. If the relationship is well-managed and the donor remains highly engaged, there’s a greater chance that they may bring more people to support your organization.

Institutions such as universities and hospitals that have large endowment funds have the expertise to manage them, and even they have suffered over the past few years of recession and low returns. So be creative when working with potential donors and find ways that maximize the value of gifts and the relationship with the donor.

Julie Mikuska


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