| by Cynthia M. Adams, CEO, GrantStation
Endowment FAQ: Answering Readers' Questions
Part Ten
Throughout this Tracks to Success series, we have received
numerous questions. Though we've answered many of your questions
directly, we also thought it would be helpful to share some
of these questions and our answers with our readership.
READER: We envisage that “donors” to our
endowment fund can choose for their funds to be totally
invested in the endowment or they can choose to split their
gift: 70-80% goes to the endowment and 20-30% to support
field activities or to be used “strategically” as leverage
in order to secure other funding. Is this a reasonable way
to approach endowment fundraising?
CMA: I'm a strong believer in flexibility.
I think if this seems like a policy that will attract donors,
at the same time growing the endowment and providing operating
funds for your field offices, then I would do it.
If you are too stringent you'll find it is difficult to “make
the sale” to potential donors. Providing someone with these
kinds of options when they are about to write you a check
for $10,000 or $100,000 can make a world of difference.
READER: We have already discussed the question
of how to manage our new endowment fund and also came to
the same conclusion that the endowment is better off in the
hands of true professionals in financial and wealth management.
Outsourcing, for us, is preferred to internal management.
Do you have any suggestions for organizations that don't
have a regional community foundation to work with? Who else
might provide this sort of professional management?
CMA: This isn't my field of expertise,
so I turned to Terry Axelrod, CEO of Seattle-based Benevon,
a firm that helps nonprofits develop endowment funds. I asked
her if she could answer this question, and here's her response:
[Organizations that don't have a regional community foundation's
resources available can approach] any reputable financial
services or money management firm, such as Merrill Lynch
or the asset management department of your bank [for assistance].
Start by asking your board members, your banker, and your
CPA.
READER: In your Memorandum of Agreement,
Article 5 states “donations are credited on the last day
of the month in which they arrive.”
Why? This means you are offering “interest-free capital” to
the community foundation for up to a possible 29 days. It's
good news for the foundation, but in the days in which we
live there is “no free meal” in the economic world and interest
is calculated on a pro-rata temporis basis. Try to be overdrawn
and see if your bank waits until the end of the month before
charging your overdraft interest!!! I personally would have
tried to limit the gap to “one open working week.” This is
fair for the community foundation and the endowment
fund. This is just a suggestion.
CMA: This is a great suggestion. No one
on the committee or staff of the nonprofit caught this. I
have now brought this to the attention of the community foundation
and I believe they are going to amend the language to “within
five working days.” Thank you!
READER: I work for a hospital that for
many years, barely broke even. We are now doing well
(and have been around for 100 years). The goal for the
next ten years is to raise $30 million in endowment funds.
The foundation of the hospital does not have a deep and wide
history of fundraising. I know endowment dollars are
difficult to raise. How do I get started? So far we have
$640,000 in the endowment fund.
CMA: No matter what your goal, an initial
start of $640,000 is impressive. Your first step is to identify
a group of individuals that is eager to work with
you on building the endowment. Their commitment will help
drive the entire process. I don't care how good a fundraiser
you are, trying to build an endowment without the energy
and commitment of a group of people makes it a difficult,
and thankless, task.
After you've found a group that is willing to participate
in an endowment campaign, you will be able to plan the next
steps. My guess is that you will want to plan a full, public
campaign. The hospital has been around for a long time, you
have established the endowment, and you have a ten-year vision.
You may want to bring in a consultant to help you determine
if there are any internal items (such as major gift policies
and procedures) that you need to address before you launch
a campaign.
READER: Thank you for your articles. Our
Senior Center endowment was set up with very small donations
in 1998. Recently, we've had to develop a set of investment
policies. We could use an article on some standard investment
policies and structure to maintain the fund for the future.
CMA: I'd love to help, though I am certainly
not a professional when it comes to investment policies.
I would check with your local community foundation (or, if
you don't have one locally, there should be a statewide community
foundation). They often have very comprehensive and well-thought-out
policies. And, thanks for the suggestion. Perhaps we'll do
a future series on this topic.
READER: Can you suggest any websites that
may be helpful in educating new endowment board members and
keeping the organization as a whole on the proper track?
We are a small nonprofit in a rural community of 775 people,
with 250 clients within our service area.
CMA: I'd suggest checking out BoardSource.
They always have great information regarding boards on the
website. In fact, they have an Endowment
Resolution article right now that's very interesting.
Engaging with BoardSource could help you, and your endowment
board, stay focused.
READER: We are a very small nonprofit in
the process of attempting to raise an endowment. I am curious
as to whether there are grantmakers who specifically support
those who are trying to raise endowment funds?
CMA: Yes, there are grantmakers who make
endowment grants, but often they like to give to a specific
program or perhaps an operating grant first. After a few
years of supporting your organization, grantmakers are much
more likely to consider a one-time endowment gift.
Grantmakers that do make endowment grants usually like to
establish a “matching” grant (i.e. if you can raise $100,000
from individual gifts, they'll match it with $100,000). That
helps you as the nonprofit because you can tell every donor
that their contribution will be matched (very appetizing
to some donors)!
Some grantmakers like to do a challenge grant (i.e. they
will give you $100,000 once you've raised $500,000 – but
ONLY once you've raised that amount). Obviously, I am making
up these numbers, but you get the basic idea.
READER: You may [want to] mention that
the worksheet is just a suggestion and that people need to
adapt it to their organization. It was a great starting point
for me. I added several extra sections and modified others.
I guess one of the big questions I have is "how do you
do this (launch an endowment) without endangering your ongoing
donations for your regular programs?"
CMA: All of the worksheets in this series
are designed to be “tweaked” as you see fit. Nothing is set
in stone (or in this case, HTML or Excel)! The worksheets
are meant to be loose guidelines, so adapting each worksheet
is wise. As far as launching an endowment campaign without
threatening your regular funding, this is the perennial question,
isn't it?
First, build a strong case for supporting the endowment.
A clearly written case statement will help pave the way for
large, one-time, donations to the endowment that will not
endanger your ongoing fundraising for day-to-day operations.
I can't stress the importance of developing a clear, concise
statement that will guide each donor gift.
Second, educate the staff, the board, the endowment advisory
board, and prospective donors about the benefits of endowment
giving. Everyone needs to understand the benefits of establishing
an endowment for the organization. Those involved in solicitation
also need to be able to articulate these benefits.
READER: I know you're doing a quiet campaign,
but I was wondering, what other kinds of campaigns are there?
CMA: The “quiet campaign” is my own invention.
It's a way of making the Advisory Board feel comfortable
learning how to “ask” for gifts, plus allowing us to build
a small endowment fund before we launch a major public effort
. There are really two kinds of endowment campaigns: the
public campaign that launches the endowment and the subsequent
ongoing endowment building effort that doesn't necessarily
have a public launch (although at some point there might
be a public component). Both efforts, of course, have a goal.
The public campaign has a very prominent goal that helps
drive the overall campaign, whereas the ongoing endowment
building effort is usually broken into phases so you can
also demonstrate a goal. Even our quiet campaign has a goal:
$100,000 by June 2008.
READER: Who should we ask for endowment
gifts? Our organization has been around for 40+ years, and
I don't even know how to begin to sort the list of who to
ask.
CMA: There's a pretty standard sequence
for soliciting endowment gifts:
- Current Board of Directors
- Endowment or Advisory Board
- Current staff
- Past Board of Directors, Advisory Board, and staff
- Corporations and Foundations
- Individuals who make up the organization's constituency
Keep in mind that the first donors can be considered the
founders of the endowment, so you might want to come up with
your top ten prospects and work from there. The key is to
find the right person to do the “ask” (someone who knows
your prospects and feels comfortable asking for their financial
support).
READER: Is it expensive to run an endowment
campaign? What might be included in the budget for an endowment
campaign?
CMA: Actually, running an endowment campaign
can be pretty low-cost. For example, the quiet campaign we're
running is costing us virtually nothing except staff time
(which is really minimal in this case). However, remember
you may not be spending much, but you also aren't going to
be able to use the funds you raise for a while. Major costs
you might incur include: consultant fees, travel funds, materials
development (such as a brochures, thank you gifts, etc.),
staff salaries/benefits, and costs associated with recognition
or any events you might host.
We hope this has been a helpful series for our readers.
In late spring or early summer of 2008, we intend to write
another series that demonstrates our progress, discusses
any obstacles we've encountered, and talks about the public
campaign which we hope to launch in late 2008 or early 2009. |
