Even Endowments Don’t Want You to Have an Endowment

Went to a foundation’s financial conference a few years back.  Before the economy went south.

The COO of the foundation said (a direct quote), “If you’re not pulling 20% of your annual budget from your endowment roll-off, then you probably shouldn’t have an endowment.”

And now, the math:

Assuming the annual payment is 5%, your endowment would have to outnumber your annual budget by a ratio of 4-1.

Endowments are not reserve funds. They are not liquid. They have little to do with an organization’s stability.  Often, the endowment campaign is successful, but the organization teeters on bankruptcy in vast oceans of red ink.

Endowments do not prove an organization’s worth, nor does it assure its future. Although, I suppose, it does offer a bankrupt organization the chance to pay off its bills before closing for good.  So there’s that.

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