February 03, 2021

POV: Ensuring UNA Will Be Around for Decades to Come

In 2020 UNA turned 30 years old. Celebrating a milestone like that is huge. As this organization’s leader it provided me space to reflect on all of our historical accomplishments juxtaposed with what I have had the opportunity to do as the CEO since 2016. What I have come to understand is that UNA really does serve a critical role for the nonprofits in Utah.

We serve as confidant to the many nonprofit organizations in our state (there are over 10,000). We train organizations to establish better policies, procedures, and practices. We advocate on behalf of nonprofits and educate our elected officials (state and federal) so that nonprofit-friendly policies are considered and implemented. Our existence in this space for three decades has played a pivotal role in how nonprofits are welcomed and viewed across our state. With this reflection it was clear that the nonprofits in Utah deserve to have UNA around for three and six and nine more decades. In December the UNA Board cemented our commitment to the nonprofits in Utah and our future by starting an endowment.  

Starting an endowment didn’t happen overnight. UNA has been working to solidify our future by employing a couple of strategies that I think are helpful to outline: 

  • We segregated some of our unrestricted cash as board designated to cover future rent costs.  
  • We invested some unrestricted monies in certificates of deposits in various tiers (6, 9, 12, etc.). 
  • Each year we have been fortunate enough to stow some of our unrestricted revenue away to build our cash reserves for a rainy day.  
  • We aggressively manage our spending to assure alignment with the budget. 

Over the years we have been building a financial future for UNA to weather the many challenges our economy will face. Establishing an endowment was the next natural step for UNA. This endowment means that we will eventually have financing (through the dividends in the endowment) to cover critical administrative functions in the budget. It means that we can begin to approach donors and board members about estate planning because we can now accept stocks and other complex investments (land as an example). And more importantly it means that UNA will be around for decades to come! 

UNA, together with the Community Foundation of Utah, (the local nonprofit organization UNA invested the endowment with) wants to provide some helpful information for you to consider as you plan for your organization’s future. We know that endowments are often scary and appear to be elusive so let’s first begin with what an endowment (sometimes referred to as an agency fund) is and what it is not.  

What an endowment is: 

An endowment is a philanthropic fund that provides an organization with a continual, predictable stream of funds. This allows a nonprofit to enjoy consistent revenue year over year and to increase its financial resiliency.  

The benefits of an endowment include: 

  • The fund is invested in financial markets, allowing it to grow over time.  
  • The organization receives a specific percentage (typically 3-4%) of the balance of the fund annually after the first year of investment. 
  • An endowment stewarded by the Community Foundation of Utah is able to accept complex gifts such as private and public stock, or even real estate, which allows the organization to monetize assets that are traditionally difficult for nonprofits to accept but hold significant tax benefits for the donor.  
  • There are innumerable ways donors can give through their estate plan, and endowments serve as an excellent way to receive those gifts (and, planned giving is particularly timely given that over $40 trillion is expected to transfer between generations over the next 40 years). 
  • An endowment demonstrates to donors and constituents alike that the organization is dedicated to a long and impactful future in the community.  

What an endowment is not:  

Short term savings:
Endowments provide a reliable stream of funding for the long-term and are not well suited for short term financial goals. Organizations should ensure they have sufficient financial stability to avoid needing to access their endowment principal.  

Detraction from operational fundraising:
Organizations considering an endowment are sometimes anxious that the fund will draw their donors’ giving away from providing annual operating support and they will give instead to the endowment. In fact, when positioned correctly, donors are more likely to continue their regular contributions and additionally donate to the endowment, which effectively increases overall contributions. 

Overwhelming or unapproachable! 
Investing and financial management can be an intimidating and often misunderstood subject. Sometimes, the path to creating an endowment can seem difficult, confusing, or risky. The good news is that this is far from reality and there are simple tools and questions organizations can utilize to determine if an endowment is right for them. The Community Foundation of Utah has an easy DIY checklist to begin the exploration.  

I am really proud of the UNA board for taking this bold step for our future. I want to provide encouragement for any of you who are interested in taking this step but are unsure. Feel free to reach out to me or the Community Foundation of Utah if you have any questions.