Earlier this month, The Community Foundation hosted a group of nonprofit leaders to talk about how to help nonprofit organizations prepare for their financial future through an endowment.
“For years, we at The Community Foundation have talked about what it would look to design a product that would allow nonprofits to coinvest in their future,” President and CEO Tonia Wellons shared with the group.
“Through this nonprofit endowment product, we’re excited to provide our partners with the infrastructure and investment support to sustain their mission and organization for years to come.”
An endowed fund is invested for long-term capital growth – rather than going directly towards a specific program. This allows the fund to accrue value over time, while a predetermined portion is set aside each year for distribution. Depending on market performance, these distributions have the potential to exceed the original value of the gift – providing the organization with a steady, reliable stream of income, as well as a nest egg that can be accessed in case of emergencies.
“At The Community Foundation, we want to make it easier for our nonprofit partners to provide for their long-term financial stability,” Tiffanie Purvis, General Counsel and Senior Philanthropic Advisor said.
The Community Foundation’s nonprofit endowment fund is designed to eliminate many of the traditional barriers that can prevent nonprofits from setting up an endowment - including limited investment expertise or capacity. Endowments set up through The Community Foundation are managed by our professional investment team – allowing nonprofits the freedom to focus on their mission rather than their long-term financial investments. Endowments have a $25,000 minimum and can be set up as a permanent long-term endowment or a quasi-endowment with an option to withdraw under limited circumstances).
The Community Foundation also provides services including planned giving expertise to help donors understand the value of an endowment over a short-term gift.
“Donors love creating endowments,” Rebecca Rothey, Senior Advisor explained. “However, sometimes they need a little more help before they grasp the concept.”
Participants heard from Mike DiMarco, Executive Director of Horizons Greater Washington, which recently set up an endowment fund with The Community Foundation in preparation for its 25th Anniversary coming up in 2025.
“For us, at Horizons, we make a long-term commitment to our students. We need sustainable long-term funding that’s there in perpetuity,” DiMarco shared. “Being able to budget the steady income from an endowment not only puts us in a stronger position in the long-term but also in the short-term as we’re able to get annual returns on that endowment.”
“Throughout the process, the Greater Washington Community Foundation was really helpful and patiently answering our questions and helping us understand the benefits and implications of starting this endowment account.”
“As we enter 2025, celebrating our 25th Anniversary, we look forward to taking this opportunity to grow the endowment and solidify Horizons’ future going forward.”
The discussion about endowments comes at a time when large bequests from donors to nonprofit organizations is on the rise. According to the latest Giving USA Report, the number of bequests from wills and living trusts increased by 2.3% in 2022 for a total of $45.6 billion dollars.
“There’s a temptation with surprise bequests to put it directly into the operating budget – put it straight into the community all at once,” Mary Pat Alcus, a financial planner and experienced nonprofit board member shared. “But if you and your board have the discipline to put that money in an endowment, you not only provide for the longevity of your organization – you also provide an easy answer to what can sometimes be a contentious question - ‘what do we do with this money?’”
“It’s about planning for the future,” Wellons concluded. “It’s about having the foresight to let your money work for you, while you continue to work for the community.”
The Community Foundation’s team stands ready and eager to help our nonprofit partners achieve their long-term investment goals. For more information about our nonprofit endowment services, visit our website for details or contact Tiffanie Purvis at tpurvis@thecommunityfoundation.org.