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What is an Endowment?

• Endowments are funds set aside for the current and long-term benefit of organizations

• The initial and additional funds contributed to endowments are invested and a portion is distributed regularly for their designated charitable purposes

• Endowments typically are permanent and will generate income for the designated beneficiaries forever. They give donors’ charitable giving eternal life on earth.

Why an Endowment?

• To provide stability now and the future with an ongoing, regular, reliable source of income

• To buffer instability in:

  • economic downturns

  • changes in donor base

  • other unforeseen events (like a pandemic)

• To build a pipeline for future gifts through donors who want to leave a lasting legacy

How Much Endowment and for What?
Ideal Endowment Amount

• In general, the ideal amount depends on organization type, needs, revenue sources and other factors

• Some suggest an endowment that will annually support 10% of your operations. Multiply your annual operating budget by 2.5 to determine an endowment that would support 10% each year.

  • Less of an endowment and you rely on your donors giving more or increasing you donor base

  • More of an endowment and you may get complacent and lose connection with donors and/or others may wonder why you need support or if that money would be better used advancing your mission today

  • With 2.5 times the amount of your operating budget in an endowment and with a 4% average annual distribution from the endowment, you’ll be receiving 10% of your operating budget from the endowment

  • Example:

    • $1,000,000 operating budget x 2.5 is

    • $2,500,000 endowment need x 4% annual average distribution is

    • $100,000 or 10% of your operating budget

• Look at what you raise annually each year, the revenue gaps you have now in an ideal operating budget and the gaps your forecast in the next several years. Add those gaps and multiply by 2.5. That may be your goal for endowment.

When to Build Your Current Endowment or Start a New One

• When you add programs to your budget or grow capacity to serve more people

• When new needs develop, such as when a major funding source will disappear

What to Endow 

• Operations in general

• Programs/services

• Staff support:

  • team lead stipends

  • staff “extras” fund: supply enhancement, emergency needs, celebrations, project exploration, benefits

  • staff continuing education

• Tuition assistance

• Capital improvement/replacement needs

• Areas that touch a donor’s heart and match a need that you/those you serve have

Should I Take the Full, Eligible Distribution Amount from the Endowment Each Year?

• If you need it, yes – that’s why it’s there

• If you don’t need some or all of it, consider reinvesting: 

  • The fund will grow faster so in the future when you do need it, you may have a larger distribution

  • In down markets when there are losses, it will help better preserve the fund balance; if a distribution rate changes, there will be less impact in future distributions.

How to Grow and Promote an Endowment

• Legacy giving program (utilize CFAD’s planning services)

  • Organizations should always be promoting legacy giving with simple reminders and not letting it go on the backburner; this does not compete with regular giving

• Endowment promotions to raise awareness of it, addressing:

  • What is an endowment and what are the benefits?

  • What is the name and purpose of our organization’s endowment(s) and other related details?

  • What has the parish/school/organization used it for specifically – what were the outcomes and impact?

  • How does it grow (direct donations, legacy gifts, strategically invested)?

  • What is the balance and what are recent distributions?

• Endowment campaign (a basic one or large; standalone or as part of a capital campaign)

  • During Catholic Schools Week

  • On a special date associated with the founder or affiliate saint

  • Giving Tuesday

  • A tiered mailing to your parishioners/donors (contact CFAD for specifics)

  • Start a special collection weekend for the endowment fund

  • For a special anniversary: Ask people to give $50 for 50 years

• Existing special events

  • A “paddle raise” at the auction dedicated for endowment 

  • ​​​​​​​Designating a percentage of your special event revenue for endowment

• Organization surplus percentage, if any, for the endowment

• Unrestricted bequests (gifts from a person’s estate) into the endowment

  • Could receive four bequests one year and one in the next, all with varying amounts and causing budget instability

  • Adding these to the endowment grows your fund, the distribution from which is reliable, helping budget stability

Why CFAD?

• Planning

  • Works with donors who may have various needs and offers information on possible options to meet those needs, all through a Catholic perspective

  • Helps organizations with their legacy giving program and promotes funds held at the foundation

  • Acts as an extension of your staff, being your legacy giving resource

• Investing

  • Our endowment portfolio is well diversified and our size allows us to secure more opportunities in which to invest with access to top managers in exclusive asset classes while driving down costs for our partners

  • Over time, research shows larger endowment pools have larger gains

  • Follows best practices and laws regarding endowment investing and invests in Catholic responsible choices

• Grantmaking

  • Assures donors’ funds are used as intended

  • Manages the administrative aspects of the fund

  • Frees you to focus on your mission, and for organizations with multiple endowments (including scholarships), each endowment (corpus and gains/losses) needs to be tracked 

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