Ways to Fund an Endowment

By Brandon Allen
Executive Director | Fortify Foundation

The task of establishing and building an endowment fund is often daunting amongst an already tight and often busy financial backdrop.

Why is it that some schools have an endowment fund and others don’t? Who should have an endowment fund and when should it be considered?

The typical response for the average institution is when is it most convenient. When there is a point in time when our excess cash puts us in a position that we no longer need to address immediate concerns and we have some left over. Perhaps, it also falls into the category of whenever a donor is willing to make a sizable contribution on our behalf. But even then, we often know that even a large donation seldom puts us in the seat of establishing a fund. Why? Think of the last time you received a major gift? Whether that gift was a $1,000, $10,000, $100,000, or even a million-dollar donation. What happened to that money? It was probably spent rather quickly to address the demands of today. While there is nothing inherently wrong with that, oftentimes we find ourselves in similar positions in the not-so-distant future. Trying to address immediate needs and waiting for the next donation to cover it. It’s an endless (and often vicious) cycle that keeps us from making the progress we often hope for.

If you remember my article from last month, A Little Goes a Long Way we understand that sometimes it’s those little differences that make a massive impact on the future. To have a secretary on a $15k salary ending with a valuation of over $18 million dollars should give us room for pause in attempting to understand what happened to create such a fund. What was the difference? I imagine if we had made those incremental differences over the lifetime of our school, we would have seen something similar. So rather than wait for the golden opportunity to establish a fund, we encourage you to consider some alternative options.

Imagine a school that has set a tuition rate of $1,000 (I know a little unrealistic BUT it’ll be an easy number for us to work with). With that tuition rate, it has allowed 100 students to come and take part in your ministry. Based on these two numbers, God has granted you a budget of $100,000 to work with each year. It’s at this point that we have the ability to create two different trajectories. With all things being equal, we can focus on fitting all that we can expense wise to meet that $100k OR you can take the approach that we all should be taking on a personal level and see what you can do to live slightly under budget. The focus here isn’t compromising any academic standard of excellence but rather being a little more diligent with our money.

Hopefully, in your budgeting process, you’ve assessed the numbers to the point of understanding what your threshold is for the incomes and expenses are for each student. In other words, for every student you know to what extent it allows you to either meet or exceed your budget. Again, the ideal here is to provide the best academic experience while planning for a stronger and more viable future. For example, in this particular scenario, the cost per student is based on $85 actual cost to educate them. The question then becomes, what do we do with that “extra” $15? Again, this is where that change in trajectory often occurs. We can “lose” it in the natural course of additional expenses (or even enhancements) that come up OR we can be more intentional with that money. If we set aside $10 per student in an endowment fund, we have in essence built a 10% barrier into our budget. $10 per student at 100 students grants us $1,000 each year to roll into an endowment fund. With a proper investment strategy, over the course of the next 20 years, we have a fund that should have a little over $52,000. So, what has this done for us? Whether we choose to use that difference to add additional students who otherwise couldn’t afford it OR give ourselves some wiggle room should enrollment decline, in either case, this is something that gives us financial flexibility and freedom that we would not have otherwise had.

This is the key to “fully funding” your organization. It’s not that an endowment fund will cover 100% of your expenses (although with God all things are truly possible), it’s that aspects of your expenses are now covered through your endowment which allows you to not only survive but thrive in the future.

Think back to 2020. Whether it was financial, emotional, or even physical, it was a brutal year for most ministries. Oftentimes, the financial aspect contributed to the emotional and physical. We know we serve a great God that answers prayer and wants us to live by faith BUT hopefully it’s never at the expense of our own lack of diligence. It was so encouraging to hear about ministries that had set aside a rainy-day fund that allowed them to weather the storm with confidence due to their financial planning. Other ministries, not so much.

The aim of Fortify Foundation is to help you develop this strategy to the point that the financial concerns of the past are no longer an issue in the future! We provide the means for EVERY school to establish a fund regardless of their size and current financial ability. Regardless of whether you can contribute $100 or $1,000,000, we help schools of all sizes move to the point of building a more sustainable future!

If you have not yet checked out our Endowment Calculator, I encourage you to spend some time checking out the Endowment Calculator and explore the potential in what an endowment fund can do for you!

Contact us to learn more.