endowment fund
ENDOWMENT FUND FAQ
An endowment is typically a perpetual fund that is held by a nonprofit organization in support of its ongoing charitable activities or programs. Endowments may be established by donors (restricted) or by nonprofit boards (referred to as quasi-endowments, or board-designated endowments). Both types of endowments are designed to grow the principal balance and use the appreciation and investment income to support the organization as specified in its spending policy.
Most endowments are funds that have certain restrictions. Their principal is invested, with only a specified percent of the fund—”the prudent spend guideline”—being spent each year. Additionally, the payout on these funds must be used in accordance with the spending policy and withdrawal rate as specified in the organization’s Investment Policy Statement.
Yes. Our first endowment was established in 2017 with an aspirational goal of reaching $500,000. Through the generosity of 108 Endowment Founders’ members, we achieved this goal by the end of 2017. Thanks to both donor gifts and investment returns, our restricted endowment had a principal balance of just over $1M at 2021 year-end. The rate of withdrawal from the WRWF restricted endowment is between 4% and 5% per year calculated utilizing a historical asset value rolling average in order to provide a predictable and stable stream of revenue to support the Foundation’s operating costs and ongoing programs. The principal is invested in perpetuity with the view that it will be preserved, continue to grow, and help sustain our organization for the future.
We use the “draw” from our endowment to help support the operations of our organization. For 2021, the payout from the endowment fund was $27,000, calculated pursuant to our spending policy and usage guidelines.
In 2005, when the WRWF was founded, and until we began operating as our own 501(c)(3) organization in 2016, the answer to this question was ‘yes’. However, the costs of running a major nonprofit organization have increased significantly since our first 10 years of operations. Not surprisingly, despite a tight budget and diligence in adhering to it, the annual cost of operating a 300+-member nonprofit organization now exceeds the $100 per member per year fee. Many collective giving organizations of our size have established restricted endowments like ours to help support ongoing operations. Our restricted endowment, while only a few years old, is already contributing significantly to support general operating expenses. Check processing, tax acknowledgment letters, professional services, insurance, office expenses, a membership database, website maintenance, and technology for Grant administration are just a few of the costs that we incur each year. These processes are fundamental to running an organization as large as ours and now require a full-time paid administrative support person. In sum, the $100 per member fee will need to be addressed in order to accurately reflect the true costs of running the WRWF.
A quasi-endowment or board-designated endowment is an endowment fund established and funded by an organization’s board of directors, without donor-imposed restrictions. Board-designated endowments may be utilized as to purpose or time or both – all at the discretion of the board.
Yes. We recently established a board-designated endowment which consists of two parts – an “Opportunity Fund” and a “Cash Reserve Fund”. These new endowments were funded with a portion of the donations we received from the three 2021 legacy gifts.
The Opportunity Fund is committed to the same long-term approach as the Restricted Endowment and is invested for the purpose of funding future opportunistic projects, grants, or aspects of operations where there is a specific need as determined by the WRWF Board.
The Opportunity Fund is committed to the same long-term approach as the Restricted Endowment and is invested for the purpose of funding future opportunistic projects, grants, or aspects of operations where there is a specific need as determined by the WRWF Board.
It is a good financial practice for organizations to hold cash reserves of six to nine months of operating costs. This ensures that an organization can withstand an unexpected downturn in revenues. The Cash Reserve Fund will provide us with an added level of financial flexibility and a “safety net” to respond to any unexpected expenses.
When a WRWF member lets us know they have included us in their legacy plan, each person is asked how they’d like us to use the funds. To date, the legacy donor gifts we received were unrestricted gifts – meaning it was the responsibility of the WRWF Board to determine their usage. There are legal restrictions regarding the mixing of restricted and unrestricted funds so these funds could not be added to the existing restricted endowment. The Board wanted these legacy gifts to have a longer-term impact on the Foundation’s organizational sustainability. Establishing the Opportunity Fund and the Cash Reserve Fund provides us the most flexibility to accomplish this mission.
To date, 20 members—including the three we received in 2021—have pledged bequests to our legacy fund. Our sincere gratitude goes to those donors we are currently aware of including:
If you’re interested in discussing our Restricted Endowment, Opportunity Fund, Cash Reserve Fund or any other aspect of supporting our operations, please send an email to info@woodriverwomensfoundation.org and we will do our best to guide you in the right direction.
If you’d like to contribute to our Endowment Fund through a one-time gift or monthly contribution, please click the button below.
If you would like to make a gift of stocks or bonds.
Please contact Gail Landis at: gail.landis@gmail.com for instructions.
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Tax-Exempt 501(c)(3) Federal Tax ID #81-4000190
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