We must have seen it 1,000 times. A well-meaning organization wants to “add-on” an endowment piece to their capital campaign. As the interviews progress, it becomes clear that donors are more interested in the building project. While they understand the desire to build the endowment, the impact seems more diffused and less tangible, especially if its going to a general fund that supports operations.
So, aside from their budgets and massive development operations, how are billion-dollar endowments the norm for universities, and local organizations struggle to scratch out a few million dollars?
The answer is universities are not afraid to designate their endowment funds. In fact, Harvard, owner of the largest university endowment (of $40 BILLION), estimates that around 80% of their endowment is designated for a specific purpose. Colleges do not just put names on buildings, they put them on scholarships, faculty positions, and programs.
Many organizations worry that if funds are restricted they won’t have the flexibility to pay for the things they really need. But why not endow things you know will be in the budget? Take an Executive Director or CEOs salary, for example. If even half their salary is covered by a restricted endowed fund, the funds that normally would have been used for salary are freed up to use however you wish--unrestricted!
It can be difficult to project that far into the future, which is why it is important to discuss potential back-up options when putting together a gift agreement. Let’s say a donor is interested in endowing a middle school educational program put on by a local theater. In the gift agreement, you may include language that indicates, should this particular program no longer exist, the funds may be used for other educational programs.
The secret universities are on to is that even if a gift is restricted, it will still result in more unrestricted dollars in the budget. And we know donors like understanding specifically what their gift is achieving. So try changing the conversation around endowment giving, keeping the focus on that magic intersection between the donor’s goals and the needs of your organization.