When is an Endowment Called for?

An endowment usually represents a turning point — and frequently a great advance — in an organization’s life: Endowments bestow an aura of permanence on an organization, or at least on some aspect of its work. That, in turn, can give potential contributors and collaborators greater confidence in the organization’s long-term value. Leaders of an endowed organization may also feel more confident in making longer-range plans for their future. Endowment grants often
recognize a major advance in an organnization’s growth and development, drawing attention to the achievement and helping to ensure that it can be sustained. In general, there are three broad reasons for making an endowment grant or for helping a grantee to create or build an endowment fund.

Financially, an endowment can give a grantee a secure funding base that:

• partially alleviates the need for raising project or core support year by year,
• reduces dependence on specific donors,
• facilitates long-term financial planning, and
• acts as a fundraising mechanism to leverage additional support.

Organizationally, an endowment can contribute to long-term stability that:

• strengthens an institution and its relationship to other players,
• enables greater attention to long- range program objectives, with less worry about year-to-year survival,
• allows for more flexibility in adjusting the program as opportunities change.

For program purposes, an endowment can be a message to a whole field — essentially designating one grantee’s methods, or one of its activities, as worthy of permanence (and perhaps by implication, worthy of imitation). If the endowment is targeted at one aspect of the grantee’s program, it can also be a way of safeguarding the endowed activity and attracting more support to it from within the grantee’s organization.