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May 2004

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An item in the south Florida press caught our attention recently: The Community Foundation of Broward County (that's Fort Lauderdale and environs) was one of seven community foundations nationwide chosen by the Kresge Foundation of Michigan to administer an endowment challenge grant. (For those new to the term, an endowment is a corpus of money that is raised by a nonprofit with the following requirement: the only money that the organization can use to fund programs or operations is the interest generated by the endowment. The corpus must remain sacrosanct.)

Here's how the endowment challenge worked: 18 Broward County nonprofits were told that, if they succeeded in raising $6 million each toward their new and fledgling endowments, the Kresge Foundation would match the $6 million with $2 million of its own. As of late March of this year, six of the 18 organizations had indeed raised the $6 million and had therefore qualified for the additional $2 million. The remaining 12 nonprofits are hard at work trying to raise the qualifying dollars.

The Kresge Foundation and the Community Foundation of Broward County are deserving of the highest praise helping nonprofits to get endowments off the ground and to keep them in the air. If your organization doesn't yet boast an endowment-or if your endowment has lain dormant for the last few years-this is an excellent time to consider making an endowment a priority. Interest rates are climbing, and more donors than ever are seeing the value of helping nonprofits to build for their financial futures by making endowment gifts.

What we recommend is this: if you have a couple of major gift prospects who warm to the idea of establishing a legacy that will live on for many years, they may well want to make significant donations to get your endowment effort rolling. With interest rates on the rise, this is a particularly propitious time to convince a prospective donor that starting an endowment will help ensure that your organization will thrive far into the future.

Let us hasten to add that endowments are not panaceas: if you've never dipped your toe in the endowment waters before, you are probably not going to raise an initial $50 million, generate $3 million in interest, sit back with your pina colada and never have to raise money again. Getting an endowment off the ground is hard work, and certain fundraising strategies that are appropriate for your annual campaign (e.g. - direct mail appeals or sale of tickets to events) don't usually make sense for endowments. Also, you must keep the annual campaign hale and hearty whether you decide to start an endowment or not. An endowment will appeal to certain donors while others will prefer to support current programs. Make sure that you offer your donors a variety of exciting ways to support your organization.

Copyright 2007 Zimmerman Lehman.

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