The Nebraska Community Foundation works with community, organizational and donor-advised affiliated funds serving 250 communities located in 80 counties. NCF and its affiliated funds have reinvested $269 million in Nebraska since 1994.
Endowments: Why Have One?
An endowment is a permanent fund whose assets are invested to generate income to be used for charitable purposes.
Endowments may be among the most important assets that small and rural communities can have. With endowments, communities have choices. Without endowments, choices become more limited and decisions are more likely to be made by outside forces.
An unrestricted endowment provides the most flexibility and opportunity for a community or organization. The beauty of locally controlled unrestricted endowed money, compared to local tax revenues, a federal grant or a grant from an external foundation, is that you decide how to spend it. You have resources you control to help guide your direction and your hometown’s (or organization’s) destiny! Building endowments can help rural communities break the cycle of dependency.
Many of us are comfortable working on a traditional capital campaign such as raising money to build a church or library. You can use those same skills to build an endowment that will sustain your hometown indefinitely! The chart below shows similarities and differences between traditional capital campaigns and building endowments. Take note – They are more similar than you may think!!
|Differences between Capital Campaigns and Endowment Campaigns|
|Similarities between Capital Campaigns and Endowment Campaigns|
* Read more about Founders Clubs and other catalysts for building an endowment in the section on fundraising methods.
Endowments: How Do They Work?
An endowment is a permanent fund whose assets are invested to generate growth and income. By investing in a diversified portfolio that includes both equities and fixed income securities and using a long-term investment horizon, an endowment can be expected to grow at a rate significantly greater than inflation. The amount to be paid out for grantmaking is less than the total income and appreciation in the value of the endowment, in order to maintain the inflation-adjusted purchasing power of the endowment.
Because the expected growth of the endowment is greater than the amount paid out to make grants, the balance in the endowment will grow over time. Consider the case of a $500,000 endowment that is expected to have an investment return of 7.5% annually after fees and that pays out 4.5% annually in grants. After twenty years, the balance in the endowment will have grown to more than $900,000 – and that is after having paid out a total of over $600,000 in grants during the twenty-year period! See this endowment growth scenario.
Years from now, the leaders of your community or organization will appreciate the vision that led you to establish and fund an unrestricted endowment. They will have a fund they can tap to pursue impactful opportunities for the community or organization.
Lily Pischel, Wyatt Kramer and Poppy Pease are three of the lucky children who receive quality affordable care at Alpine Village Community Daycare in Verdigre.Read more →