MemberAugust 17, 2022 at 10:20 pm
I think the article is absolutely helpful in considering the pros and cons of endowments and reserves. I have had the experiences described in the article. A number of foundations will not fund us because we have an endowment. However, many foundations do fund us because our endowment signifies that we are stable and around for the long term. They see their grants as investments and they want the charity they fund to be around for the long term.
Three nonprofits in my sector went out of business in the past two years and left a void with no services in parts of the state. They had no cushion to weather the ups and downs of Covid or the cash flow problems of late government payments, We can afford to do business in New York City where the government routinely takes a year to register a contract and then expects us to bill for 12 months of service that we already provided. Charities that need to take out bank loans with interest to meet their cash flow obligations will never catch up and default and/or bankruptcy always loom.
I also believe that having an endowment and/or reserves is a rare privilege that should not be taken for granted or squandered and that I have an obligation to spend it wisely in emergency situations with the full oversight and approval of the Board.