#1 Financial Challenge in Christian Education

Most Schools Are Grossly Under-Endowed

By Brandon Allen
Executive Director | Fortify Foundation

What comes to mind when you read this title?  
There are 2 underlying assumptions that we can operate from in the immediate: 

1. This statement presumes schools have an endowment. 
2. This statement also shares that there must be a clear goal for the endowment.  

I’ll never forget first reading this when researching statistics around financial and fundraising trends. I have since shared this a dozen times in one of my presentations on how to build a sustainable financial model. It hit me like a ton of bricks! That’s it! They got it! They saw the need for a better financial strategy. I’ve since used this statement at many conferences when presenting around the subject of finance.  

As we’ve traveled the US meeting with schools across our great country, we’ve discovered the incredible truth behind this statement with one caveat… It isn’t that most schools are “grossly under-endowed,” it’s that they are completely non-endowed!   

Does your school have an endowment?  

One thing I’ve discovered in my travels is that most schools don’t know what they don’t know. I know, so obvious, right? Endowment hasn’t even been a thought in most schools because they aren’t aware of what it is and what it can create. It’s been such a privilege to contribute to further changing the landscape in this arena and help introduce a foreign concept to k-12 Christian schools.  

Up until now, the concept of an endowment fund has seemingly often been limited to schools with a certain level of affluency or those blessed with a major gift donor that had the vision to start one for them. Some of those schools have even had a tendency to push for endowment as a last resort option to start funding once they’ve reached the point of building everything else (i.e. – now that we have the facilities, we should consider funding and sustaining them). It’s an afterthought created out of necessity rather than built into the operational strategic plan. Many colleges / universities often have endowments built into their facility expansion campaigns early on. Anytime there is the planning for a new building, an endowment is just part of the overall costs pertaining to that facility. This is the difference in thinking when it comes to waiting for it to happen versus creating it as part of the process.  

We must understand that endowment funds aren’t luxuries for later when we can afford them, they are one of the essential keys to long-term stability.  

Need Proof? What did the financial conversations during the 2020 year look like? Was it a time of confidence or a time of scrambling to figure out how to meet budget and wondering what the following year would be able to consist of? I’ll never forget hearing about a ministry that had built an endowment into their operations from day one. Over a 25 year period they set aside a small percentage of all donations to build their fund. Come 2020, while most ministries were in a position of struggle, this ministry was postured in a position of confidence waiting on how God might use their resources next.  

What should the goal be?  

How do we know if we are under-endowed? What is a good endowment size? It’s one thing to have an endowment, it’s a completely different situation to have an endowment that is accomplishing what it was intended to.  

While we can’t target a specific number due to varying school sizes, we can lay down some initial goals to help move you in the right direction.  

The beautiful thing about endowment fund goals is that they are all relative to the size of the school. In other words, they are scalable, and an endowment fund goal works based on the operating budget for the school.  A key calculation for determining a good goal is to take 10% of your annual operating budget and divide that number by the % you anticipate receiving in spendable each year (typically 3-5%). What you’ve just created is an endowment fund that will create a perpetual income stream to facilitate 10% of your annual budget.  

Of course, different endowments with specific designated purposes may have varying intents and may require different amounts. For example, an endowment fund established for the sole purpose of scholarships will have a different target size than an endowment fund that is looking to fund capital improvements. Scholarship goals are fairly easy to figure. A scholarship fund should focus on reaching either a set number or perhaps a continued growing number of scholarships each year. If your school grants out 100 scholarships, it requires either a certain level of discount budgeting or amount in fundraising to make this happen. The goal of the endowment should be to subsidize the majority of these in the future. This will either relieve the pressure from the budget through discounts given OR will open the door for future contributions to expand scholarship opportunities or address other areas of need.  

Regardless of whether or not you have a single general endowment or multiple designated funds, the aim should always be to create as much flexibility as possible, so your school is able to weather future economic downturns. Any fund that helps pay for future expenses in perpetuity will prove to be an invaluable blessing.  

In conclusion, I do want to finish with an additional point of encouragement. This is the rest of the title as originally researched.  

“Most schools are grossly under-endowed… but they seem to be tackling it.”  

The next question is, are you?