Building Stability: A Rainy Day Fund

The future belongs to people who see possibilities before they become obvious. Ted Levitt, an American economist and professor at Harvard Business School.

Unfortunately, some non-profit organizations will not survive this time of the pandemic, despite the emergency funding they received and the value of their mission. However, other organizations may have fought this battle from a position of strength, relying on endowments and current donations to help them survive. These organizations are in the best possible place as our world returns to "normalcy" even though their endowments may have suffered.

For those organizations that fall in between (those who were strained but survived relatively intact while depleting their resources), they still may have have sufficient funding to survive and begin again. Their programs may have been interrupted significantly but they are still in a relatively good position. These organizations were also more likely to have communicated sufficiently with their constituency throughout the sheltering-in process. They also may have altered their strategy to support the mission by shifting their tactics to accommodate the situation.

I work with an organization that already employed on-line learning as a key strategy and they emphasized the impact of their courses once again for their current donors and prospects. They emphasized: We are here for you. They further expanded their courses to reach out to their constituency in very helpful ways, instructing and assuring their own population of users of how to plan for a return to normalcy. This further emphasized and reinforced the value of their mission for both their network of on-line users and their donors.

I also work with an organization that teaches 3-D printing to their students. As the virus hit their small and economically challenged community, they promptly reached out to manufacturers of respiratory devices to offer assistance in using the 3=D laboratory to produce needed parts for them. Their natural instincts to do so created community impact and certainly reinforced their donors.

While such organizations continue to think about the future, one thing that the pandemic has emphasized is how important it is to have stable unrestricted funding available. While this can come from current contributions, an added level of assurance can be created with quasi-endowment funds.

Quasi-endowments are funds earmarked by the board, rather than by donors, to act like permanently restricted funds from which income is available for general operations or certain specific purposes. In essence, the board decides to treat unrestricted funds as an endowment. For a rainy day.

How does one form such a fund? Through excess operating funds and revenues or through outright contributions or bequests.

Such funds have a great deal of flexibility. The board decides that there may be a restriction on such funds, but the flexibility is created from the fact that the board can decide at any time to remove the restriction and use not only the interest, but the quasi-endowment fund itself for a specific purpose. Hopefully the fund will be restricted for a long time--with interest either being reinvested in the fund or used for a specific priority. The fund thus brings stability to the organization currently and for the future.

The timing for starting such a fund has never made more sense than now for some organizations. Launching a quasi-endowment fund can be considered if the prospects for the mission are sufficient that the organization can meet or exceed its budget from fundraising efforts or organizational revenues. In addition, it works if there is a stable board and staff. Of course, the implication here is also that outcomes of the work itself are inspiring and growing and making an impact.

Having such a fund available creates a sustainable advantage for the organization. It is an organizational asset providing a favorable long-term position, reinforcing to all involved. For thoughtful and valiant organizations, this is an ideal strategy. What a valuable asset in the face of another pandemic or life-altering event like this one has been for all of us.

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