Posted June 1st, 2000

What Are We Doing About Endowment?

One of the favorite topics of trade journals, convention planners, and others these days is “endowment development.” Like other jargon in our field, the term has become a codeword for any number of activities.

For some, endowment development means the process of encouraging committed donors to make gifts for general or restricted purposes to be set aside permanently or “semi-permanently ” and used to meet future organizational needs.

To others,“endowment development ” has become synonymous with “planned ” or “deferred ” giving, regardless of whether the gift is actually restricted to endowment or any other use.

In still other cases, “endowment campaigns ” refer to a “fall back” position in capital campaigns. These components of campaigns are sometimes used to help facilitate the inclusion of bequest commitments and irrevocable deferred gifts where donors for reason of age or other circumstances are not able to participate in other more traditional ways.

For the purposes of this article,we consider endowment to be funds set aside in an institutional “savings account” which, depending on restrictions, can be used to fund specific programs or can be tapped into in the event of unanticipated needs or when current support falls short for one reason or another.

The buck stops

Under this definition, who cares about endowment? In our experience,the higher you go in the volunteer and professional ranks and the longer staff and volunteers plan to stay in a particular role, the more interest you will find in building endowment.

When an institution is successful in accumulating endowment assets,who receives the credit? In most instances it will be a long-term chief executive and/or long-term volunteers.

On the other hand, when there is insufficient endowment,who receives the blame? More people share the blame in most cases, even the relatively short-term employees who are involved in “major gifts,” “planned giving,” and similar roles, but the chief executive will usually still head the list.

Responsibility shifts

We are increasingly seeing development executives being held accountable for the state of the endowment, regardless of the length of their tenure. Greater professionalism in fund raising has led to longer and more productive stays for many. The longer an executive has been in a development role, the greater the expectations for impact on endowment may be.

Experienced chief executives and board members know that it is possible to have an impact on endowment through a carefully orchestrated plan carried out over three, to five, to seven years.

At least, after a year or two, most development executives should be ready for the question, “What are you doing to increase the endowment?” Your answer may shape your career.

Where does endowment come from?

In our experience, historically most endowment has been realized in the form of proceeds from bequests and other deferred giving techniques.

One cannot predict exactly when these gifts will come to fruition, although with knowledge of ages and other factors, rough predictions are possible.

Bequests and other similar gifts typically result from many years of cultivation, often of a relatively impersonal nature. Because of the sensitivity of the subject of long-range financial and estate planning, it is relatively rare for a donor to discuss personal estate plans with a staff member, much less a peer acting in a volunteer capacity. Where donors do notify an intended recipient of a bequest, it is vital that well-trained and committed staff be diligent in managing relationships with such persons. Not to do so can result in changes in plans that can have a tremendous negative impact on future endowment funding.

Today’s environment

In our current environment where unprecedented levels of wealth are held by an increasingly older population that is beginning to consider the ultimate disposition of those assets for charitable and other purposes, it is more important than ever to consistently encourage gifts for endowment.

This comes down to the need to be consistently communicating to your constituency about how they can make their “gifts of a lifetime ” in ways that first consider the needs of their families and other loved ones. Recognize that the funds often must first serve as the donor’s personal “endowment ” before becoming part of your institution’s endowment.

As the challenges of acquiring and maintaining relationships with younger donors become increasingly apparent, top management and volunteer leaders will increasingly be turning their attention to endowment as a source of funding current operations needs. But in some cases they may not focus on endowment and reveal their concern to development staff until it is too late.

For that reason, when planning fund development programs this year and beyond, stop and consider how you will respond when asked, “What are we doing about endowment?”

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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