Is It Time for an Agency Fund?

Ensuring that a nonprofit organization can sustain its mission for the long term is a key responsibility of the organization’s executive team and board of directors. But how solid is your plan for perpetual support and sustainability?  

As your organization emerges from the aftermath of pandemic shut downs, you and your board of directors may look back and realize that 2020 and 2021 have been a wake up call. Nearly out of the blue, you were faced with figuring out how to ensure that your mission can survive ups and downs in the economy and shifting donor priorities.  

At the very least, COVID-19 opened the door for an opportunity to revisit important questions that every charitable organization needs to be prepared to address. For instance: 

  • How clear are our endowment and reserve fund spending policies?  
  • Do these policies enable us to use the resources in an emergency? If so, what constitutes an emergency?  
  • Are there limits on how our organization can use its reserves and how much we can withdraw? 
  • Who has the authority to make decisions about dipping into reserves?  
  • What evidence and documentation are required to do so?  

Yet another set of questions gets to the heart of donor intent: 

  • Have we properly accounted for various donor gifts?  
  • Did any donors themselves use the term “endowment” in their gift agreements or instructions, and if so, what were the donors’ expectations for our organization’s use of the funds?  
  • Would donors’ expectations and intentions cover emergencies?  
  • Whether or not a donor explicitly used the word “endowment,” how should our staff and board honor donor intent if our team knows that the donor intended the funds to be available as emergency reserves?  
  • For any funds received where a donor expressed certain wishes, have we properly documented our investment and spending decisions such that donors and their families would be comfortable if we were ever asked to produce written materials supporting our actions?  

Whoa! We know that’s a lot to take in, but our team is here to help. 

In addition to brushing up on the rules and expectations surrounding “endowment” gifts, we suggest that you lean on the community foundation to help you evaluate and organize your various endowment funds and reserve accounts. In many instances, the community foundation can offer structures and accounting services to help you avoid tricky situations in which donor intent and emergency needs of your organization appear to be at cross purposes.  

An agency fund at the community foundation is a powerful first step to securing your organization’s financial future for generations to come.

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