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How An Agency Endowment Can Help A Nonprofit Plan For A Sustainable Financial Future

April 12th, 2022 Back to Browse Stories

Emily Angyal, Philanthropic Services Officer

Agency endowment funds provide nonprofits with a reliable source of income to continue their work well into the future.

Securing sustainable funding is hard work for any organization. The Community Foundation for Southeast Michigan has significantly increased endowed capital throughout the region since our founding, providing reliable and flexible funding through agency endowment funds.  

What is an endowment fund? 

An endowment fund is part of a pool of assets that are invested and a portion of which is made available for charitable purposes annually. The remaining assets and investment returns are retained in the fund to provide for growth over time. An increasing amount of support will be available from the fund as it grows. 

Through the Community Foundation for Southeast Michigan, any nonprofit can establish an agency endowment fund with a minimum contribution of $10,000. Currently, the annual distribution is 4.5 percent of the trailing twelve quarter average value of the fund as of December 31. 

What are the benefits of an agency endowment fund? 

Here are five reasons that establishing an agency endowment fund through the Community Foundation is beneficial for nonprofits. 

Secure funding that lasts. 

  • Agency endowment funds establish consistent, flexible funding in perpetuity, to meet the needs of the organization as they arise. Agency endowment funds can be used for operational expenses—a category where nonprofits can sometimes struggle to secure funding.  

A stable foundation, no matter how uncertain the times. 

  • While direct giving and other sources of income can fluctuate rapidly, the annual distribution from the agency endowment fund is calculated based on a trailing average of the endowment’s market value across three years. This neutralizes the dramatic ups and downs of the economy and provides consistent revenue. 
  • Agency endowment funds are invested in the Foundation’s endowment pool, which targets 6-8% growth each year; last year, the return was 11.9%. Total return, consistent with prudent investment management, is the Foundation’s primary goal. 

A visible commitment that encourages donors. 

  • An agency endowment fund is a signal to donors that a nonprofit is planning ahead. The endowment fund demonstrates not only that an organization has enough capital to invest, but also that it intends to be around for the long haul. This attracts and encourages donors to support the organization both today and in the future. Partnering with the Community Foundation to manage your agency endowment fund compliments your efforts in prioritizing long-term sustainability.  

A space to talk about planned giving. 

  • Agency endowment funds are a great way to introduce planned giving to your donors. Planned gifts account for nearly 10% of all nonprofit contributions in the United States, and legacy or planned giving programs that cultivate strong relationships with loyal donors are central to a nonprofit organization’s long-term financial growth.  
  • An agency endowment gives donors who may be considering a planned gift the confidence that their contribution will be part of a lasting legacy, and the opportunity to support their favorite charities in perpetuity. The Community Foundation has the expertise and resources to support nonprofits to market planned giving options to their donors and, when possible, secure the gift in writing.  

Reduced administrative burden. 

  • The Community Foundation currently manages more than 230 agency endowment funds and has the systems in place to help nonprofits make the most of their endowment. The Foundation handles all gift processing, record keeping, tax reporting and audits, in addition to providing expert investment oversight and tools to grow the endowment fund.  

Agency endowment funds maximize the impact of giving. 

Building a long-term, revenue-producing endowment fund is one of the best ways a nonprofit organization can build a sustainable financial future for its mission. If you are considering establishing an agency endowment fund or if you would like to support an existing endowment fund, please use the form below to contact us.