• Abbie Smith

    I am interested to hear where you might fit a community foundation into this debate.

  • Renee McGivern

    Best description of the plus and minus of endowments I’ve ever seen. Endowments aren’t magical. I ran an org that was founded by passionate volunteers who raised $200,000 for an endowment the first year. They thought the endowment meant the nonprofit would last forever. Some thought they’d never have to contribute again. Wrong on both counts. It was quite naive thinking from leaders who are normally very shrewd and level-headed. Endowment discussions at many nonprofits are not grounded in reality, both for and against endowment. This article is a great start in moving the conversation beyond magical thinking.

  • Mark Hager

    Thanks, Renee. Abbie, I’ve not ever been privy to this discussion in a community foundation, so I can’t say how the debate might typically play out. My guess is that many of the same issues that I mention in the article would be in play for a community foundation, but that it has some things in its favor that would lead it, on balance, toward endowment building. One is that community foundations aspire to be community institutions, so they may attract the kind of legacy donations (or bequests) that could go to endowment. Also these contributions might more-typically come without all the questions about what kind of programming it might support. That is, the community foundation might not have specific clients or issue advocates that are demanding that the money be spent immediately on current needs.

    Another thing supporting the endowment decision is that community foundations usually have “foundation” in their name, and people are already mostly comfortable with the idea of a foundation having a corpus. Some community foundations have sizable invested assets, so there are examples for proponents to point to. Another thing running in their favor is that community foundations often already have fairly sophisticated financial administration in place, which is necessary for making smart money decisions associated with an endowment. I think I’ve talked myself into the idea community foundations might be well-situated to pursue endowment building.

    Mark Hager
    [email protected]

  • Patrick Sullivan

    Hi Mark, great article! Please forgive my ignorance as I’m brand new to the nonprofit sector (began reporting for The NonProfit Times about a month ago) but what happens to those endowment-rich, cash-poor organizations that you mentioned? Do organizations that have large endowments ever run out of money to implement their programs? And if they do, what happens to the organization? What happens to the endowment?

  • Mark Hager

    Hey Patrick: Just seeing your comment now… sorry. I think the best way to answer is to point to a New York Times article from a couple years ago that covered this topic. Hechinger and Levitz cover this better than I can — [LINK=http://online.wsj.com/article/SB123432521248071761.html]http://online.wsj.com/article/SB123432521248071761.html[/LINK]


  • Mark Hager

    Whoops… that’s the Wall Street Journal, not the New York Times.


  • Mary Ann Gloriande

    hi Mark,

    Great article. We, the board, are determining if an endowment might be right for our non profit so i forwarded a copy of the article to them because i believe it will enlighten even the lawyer in the group.

    Q- Can endowments be borrowed from? And is there something special in the way of setting that up to include borrowing?

  • Mary Ann Gloriande

    Already did.

  • Virginia

    Can you tell me what IRS regulations guide the creation of endowments? Some in my circle believe that Board of Directors can vote to create a true endowment.