Endowments—Having Them When You Really Need Them
How important are endowments? The simple answer is critical. However, based on the pandemic and a recent report from TIAA and the National Association of College and University Business Officers (NACUBO), they may be more important than we even thought.
As it relates to the pandemic, I’ve had many clients, as well as colleagues, tell me about how their endowment “saved them. “I’m not sure that that is entirely true, but the organizations with endowments, during the pandemic, who had financial decisions to make had more options if they had endowment dollars to draw upon. In largess, look at the issues involving college athletics. The pandemic took away immense amounts of TV and gate/attendance revenue from college athletic departments. I happen to be in Nebraska, and it was publicly disclosed that the $100+ million “reserve” savings account the athletic department had built over years of great financial decisions and fundraising efforts resulted in the athletic department not having to make major changes or take out a loan to cover a years’ worth of expenses with very little revenue. In comparison, multiple other athletic departments announced taking out loans up to and including $100 million to ensure viability.
You might be thinking, “well that’s so much money.” Take off a couple of zeros. Smaller universities, from colleagues I know who are on the governing board, are actively engaged in conversations about how to ensure endowments in the future. Why? Because of what they just experienced over the last two years. And when you add in the outcomes from the study of endowments, which indicated endowments saw an average return of more than 30% in 2021, you can begin to see the benefits of financial flexibility.
While no one can go back in time and make different decisions 30 or 40 years ago, which might’ve included putting more money into an endowment or conducting an endowment fundraising campaign, we can make changes for the future. Is your organization actively talking about its endowment? Is there a strategic board level/leadership thought process about its importance? Are you actively engaging prospects and donors about endowment opportunities or blended gifts? Failure to answer these questions in the affirmative could put your organization in financial stress in the future.
