What endowments can do for nonprofits

Is your nonprofit interested in long-term stability? How about keeping your organization’s mission alive for years to come?

You might want to think about an endowment. An endowment is a pool of funds, invested to produce earnings.

Earnings typically are used for purposes chosen by your nonprofit’s board while the principal remains intact and, ideally, continues to grow. And a portion of the earnings can be channeled back into the endowment to increase the principal.

One organization’s experience

Living Branches – a system of retirement living and housing communities in southeastern Pennsylvania – is a good example of how endowments can benefit an organization and the people it serves.

Living Branches, based in Souderton, has an endowment that funnels money to a benevolent care fund that helps residents who can no longer afford the full cost of their care.

Ed Brubaker, CEO of Living Branches, said, “We made the decision to focus our fundraising on growing those funds, rather than on operating expenses for the year. In our case, donors prefer something focused on the long term,” he said.

Any undesignated donations go into the endowment that supports Living Branches’ benevolent care fund, Brubaker said.

That’s how many nonprofits take advantage of endowments – the endowment funds help the organizations provide their services and programs to more people.

A supplement, not a replacement

Endowments aren’t intended to take the place of your usual fundraising efforts. They supplement your regular giving, rather than replace it.

Endowments provide a way for donors to support future generations who will run your organization – and continue carrying out your mission of helping those who rely on your services.