Allocating assets, part 5 – Charities, donors turn to endowments

[Editor’s note: This is the fifth of six articles examining endowment strategies by charitable organizations.]

By Todd Cohen

The Help Inc. Center Against Violence near Greensboro, N.C., scrambles year-round to secure grants it needs to cover its $550,000 budget.

“It’s a constant worry,” says Cynthia Pugh, executive director.

To kick-start a long-term source of income for financially-strapped nonprofits like the center, the Community Foundation of Greater Greensboro last year launched an endowment-building initiative.

The foundation agreed to give $10,000 to each of five nonprofits – including the center — if they raised at least $20,000 in endowed funds from new sources within a year. In November, the foundation made the same offer to five more nonprofits.

The goal, says Patrick Weiner, the foundation’s vice president for donor services and development, is not simply to stage a one-time fundraising drive but to stimulate creation of a long-term financial strategy.

With funding shrinking and demand for services growing because of the slumping economy, nonprofits face rising pressure to find new sources of income – and many are creating endowments and planned-giving programs.

“Having an endowment fund can provide a secure base of resources that can partially alleviate the need for raising annual funds,” Weiner said.

At the same time, donors are turning philanthropic strategies such as planned giving and endowments that are critical for nonprofits bearing the brunt of tough economic times, says Virginia Espositio, president of the National Center for Family Philanthropy in Washington, D.C.

“What they can count on,” she says, “is that donors and their families have put money aside that they can count on, in good times and bad, to be available to them as they carry on their charitable work.”

Weiner says setting up an endowment can help a nonprofit move toward long-term financial planning, while creating “a sense of permanence that strengthens an organization in the eyes of its donors.”

And the process of planning for an endowment “can serve as a catalyst for organizational change, and get the board to where it works more efficiently together,” he says.

Holly Welch, vice president for development and legal affairs at the Foundation for the Carolinas in Charlotte, N.C., says the ailing economy should prompt nonprofits without endowments or planned-giving programs to begin planning for them.

She says nonprofits also should prepare for the huge transfer of wealth between generations that Boston College researchers expect will generate at least $6 trillion for charity over the next 50 years.

“You need to jump on the wealth-transfer train,” she says. “And the only way to get on that train is to have a seat to put your bequests and gifts.”

NEXT: Community foundations give charities a boost.

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