Just when it seemed the annual fund—that old workhorse of the fundraising world—was finally getting some respect, the stock market has come roaring back. Presto, change-o, all eyes are again focused in the direction of endowments. And this despite the fact that the majority of nonprofits realize but a mere pittance of their annual income from investment earnings—in the best of times.
Consider, for example, some stats from theological education (the corner of the nonprofit world in which I spend the bulk of my time) that I cited in an article in In Trust magazine:
The average theological school in the United States derives 39 percent of its revenues from individuals and/or religious organizations, as compared with 13 percent from investments and endowments (Association of Theological Schools 2006-2007 Fact Book). It would have required invested funds totaling a whopping $7.8 billion (based on a 5 percent distribution) to throw off the $390,412,000 in gifts that ATS schools received for current operations from their “living endowments” in 2010.
Don’t get me wrong. I’m not anti-endowment. In fact, I wish I had one of my own. But when long-term financial vitality is the goal, it’s hard to beat the benefits of a growing annual giving program. The annual fund is also key to encouraging habits of generosity. As I noted in my In Trust article:
Although seemingly a short-term initiative, the annual fund is as much about the long term as the present. Every gift binds donors’ hearts more tightly to the mission and ministry of the school and which provide the school with a precious “living endowment.” Gifts for named scholarships, endowed chairs, and new buildings are wonderful, but it is unrestricted gifts that are most crucial to keeping nonprofit organizations moving forward.