There are only a dozen charities in our community that have sizable endowments. Ideally, although it will vary based on the type of charity, a reliable income stream of 15% to 25% of a charity’s annual operating expense would be a respectable endowment.
That may sound like a lot, but knowing that a typical endowment can reliably provide about a 5% distribution each year, after costs, gives you an idea of just how large an endowment needs to be to support 20% of an organization’s operating costs. For example, a charity that has an annual operating budget of $800,000 would need an endowment of $3.2 million to provide 20%, or $160,000, of operating income.
Experienced fundraisers know that to build an endowment you typically work with a large pool of annual donors who, over time, consider making an endowment gift, usually through a bequest. Donors are gratified by making a more substantial gift through their estate to support the charity they know is doing great work. And their gift ensures that the charity can continue, and expand, their work in the future.
The problem is that for many charities it is difficult to do professional and consistent relationship building over a period of years to engage donors in supporting the good works of the charity. Even when a charity is successful in this process, they often focus solely on funding current needs rather than providing donors with opportunities to also support their long-term goals and mission through endowment giving.
But you never know when you will receive a gift, and being prepared is a must. I recently saw a story of one such charity. Domestic Violence Solutions for Santa Barbara County had recently opened an account at its local community foundation, a board-controlled fund where the group intended to park the money it hoped to raise in its first-ever capital campaign. But just as the social-service group was about to start planning the campaign, it got a surprise $1-million bequest from Susan Trescher, a lawyer and a friend of a former board member. “Luckily, we had just created a catcher’s mitt and just established a relationship with an entity we trusted with our money,” says Marsha Morcoe, associate executive director of the organization. The organization typically raises less than $1 million a year. Being able to rely on the Santa Barbara Foundation’s financial expertise is invaluable to Ms. Marcoe’s small organization in helping it invest and manage the gift, she says. Another unexpected benefit of the endowment, she says, is that spending it requires approval from her governing board, so it can’t be spent hastily.
At the Community Foundation of Western Nevada we have dozens of relationships with charities in northern Nevada and the eastern side of the Sierra and look forward to the “surprise” gifts that have been and will be received by worthy charities. If you are involved with a charity and wish to discuss support–as a donor, as a professional advisor, as a charity executive, or as a board member, please give me a call.
We make philanthropy simple, powerful, and effective.
Please call me if you’d like to discuss the initiative or any other charitable ideas.
Chris Askin, President and CEO,