Why have donors created 115 endowment funds at the Community Foundation?
“We established our Alzheimer’s Family Support Endowment Fund at the Community Foundation in 1999,” says Mike Ives. “This gave us a way to give support to caregivers for those suffering the debilitating disease of Alzheimer’s and know it will be provided long after we are gone.” Mary and Mike Ives have two endowment funds at the Grand Rapids Area Community Foundation to support causes in which they believe.
An endowment fund grows the initial investment (principal) which generates income (approximately four to five percent per year) to help pay operations and programs. Because only a percentage of the income is spent each year, the organization is less vulnerable to every economic crisis.
Over the next few weeks we will bring you information about how people and organizations are investing for future generations through endowments. First, here is what an endowment is, and how endowments work.
“An endowment is a fund managed to last “in perpetuity” – or in other words forever,” says Chris Fulton, Grand Rapids Area Community Foundation Executive Director. “Endowments are gifts that keep giving well into the future, while supporting the needs of the moment.”
What Is an Endowment?
An endowment is like a savings account. Only the interest from the fund can be spent, not the principal (donations) that anchors the endowment. Only a portion of the interest or earnings from the endowment (currently 4 ½ percent at the Community Foundation) can be spent annually to ensure the original funds grow over time. Professional money managers often oversee endowment funds, investing the money in stocks, bonds, and other investments. Endowment investments have dual goals: to grow the principal and to generate income.
Mary Ives states, “Communities are really all of us working together, and if we don’t support each other – if we don’t support the organizations of our communities – that community will not be as healthy.”
How it works
In the broadest sense, an endowment is a donation that is given to a non-profit institution on the condition that it is used for the benefit of that organization. Most endowments are designed to provide a permanent source of income by keeping the original amount invested and using the accrued income from dividends for its charitable purpose.
What Are the Advantages to an Endowment?
Small and new nonprofits often only think about the current fiscal year or the next payroll. It is important to get out of that financial trap as soon as possible. Endowment funds should impress donors. Knowing that your nonprofit manages its resources well, plans efficiently, and will likely survive any crisis sends an important message. Donors have the option of giving a gift that keeps on giving well into the future, and the opportunity to support the needs of the moment such as operating and program funding.
The Greater Itasca Area is very fortunate to have people, organizations and businesses that invest in our communities. Look around. We have wonderful towns with vast resources that turn our little woods and neighborhoods into communities. “Our best resource is our people. Local people invest their time and money into turning our slice of Northern Minnesota into a real community,” states Sarah Copeland, Director of Grants and Programs at the Community Foundation. “Community is more than just a bunch of people who share a zip code. Community is about investment.”
One way to invest in a community is through endowments. Last week, we wrote about the Reif Center and ISD 318 endowments at the Community Foundation. We spoke with David Marty, Executive Director of the Reif Center who reiterated the importance of “being good stewards for the future” and having “the resources for future generations.”
Anyone can give to an endowment at the Community Foundation.