Endowment seems to be the buzzword around the Strategic Grants (virtual!) office lately.
Some of the questions we’ve been getting recently from our For-Purpose clients include “Do Trusts and Foundations give to a charity’s endowment fund?” “Can we get a grant for an endowment?” “How do we grow our endowment?” “Can I use it to buy a new coffee machine?” (Okay, maybe not that last one, but you get the idea.)
In light of the great questions we’ve been getting, we’re taking to the blog to share some ‘Endowment 101’ with you all. Read on to find out more about the somewhat magical world of endowment funds, the gift that keeps on giving.
What is an endowment fund?
In a nutshell, it’s like a magical money tree that keeps on giving. It’s a permanent source of funding that, if managed properly, can provide support for your organisation’s work for generations to come.
There are a few different flavours of endowments, depending on who set them up and what their purpose is. But the basic idea is the same: you invest the money, and then use the income generated from those investments to fund your mission.
More specifically:
- An endowment fund can provide an ongoing and sustainable income stream for not-for-profit organisations. The fund’s capital is generally preserved, and income is allocated for a specific purpose which could be for scholarships, internal grants within an organisation or general organisational costs.
- An endowment is normally a fund which is established to provide an income for specific beneficiaries. The fund is usually invested in perpetuity with only the income distributed, not the original capital amount. This could be from a deceased estate or a fund with specific conditions.
Some examples include:
- Patricia H. Reid Endowment Fund
- David Winston Turner Endowment Fund
- James O’Neill Mayne Estate
Being able to rely on, or have reasonable expectations of, regular income to pay for the identified need on an ongoing basis is a goal for many organisations.
Do philanthropic funders like Trusts and Foundations and Private and Public Ancillary Funds (PAFs and PuAFs) have a track record of giving to charity endowment funds?
The short answer is yes, BUT obtaining these funds for an endowment fund may not be the right way if the funder is holding an open grant round.
There are generally very specific guidelines and eligibility requirements for open grants and an endowment fund with no set start and end date of a project/service may not be suitable. Endowment funds are also regularly listed as an exclusion in grant guidelines (another reminder to always check the funding guidelines very carefully before applying for a grant and reach out to the funder directly with specific questions, if their contact details are available. If you’re a GEMS subscriber, we keep funder records updated for you with all publicly available data).
This is also where our advice and strategies on securing funding from Trusts and Foundations come into play (check out the popular blog post here).
As with all funding requests it will depend on the relationship between the funder and the organisation, alignment of mission and vision and stewardship.
Initial donations to a charity’s endowment fund, when the fund is created, are often larger in nature and publicly announced.
Some examples are:
With the increasing awareness of the Pay What it Takes and Reframe Overhead movement, and the general cry from the sector to funding general organisational costs, more Trusts and Foundations are open to providing grants to endowment funds, where there may not be an immediate need for the funds, but will help contribute to the investment base of the endowment to help with funding future projects.
Strategic Grants is Australia and New Zealand’s most trusted team of grants specialists, delivering the largest funding base of AU and NZ funders through the GEMS funding database and wrap around consulting services. Find out more here.