Endowments Part 1

I began my research into endowments by asking myself the question: should one give to an endowment or give directly to a cause with most of the contribution allocated to action immediately. For those unfamiliar with an endowment it is essentially a charitable entity designed to allow the income from the entity to go toward charitable causes. For example, instead of giving $25k to a university to be used for socioeconomic causes, one can contribute to the university’s endowment and allow perhaps $1k to be used for socioeconomic causes every year in perpetuity so long as the investments of the endowment continue to grow and provide for the $1k outlay.
For many reasons I have been in favor of endowments. Why not create something sustainable and leave a legacy rather than dump a lump sum on an organization? It is attractive to think that I can give $25k and allow that to provide for scholarships for more than fifty years multiplying the impact of my gift. If invested appropriately, it can have a dramatic impact particularly on those administrative needs every organization has but few people like to contribute toward. Not many mention to their spouse and celebrate that they were able to give money for the upkeep of an old building when they can have a new one named after them. It can also be very liberating to a cause that is constantly strapped for cash and having to rely on gifts every month to meet budgets. Imagine if you sat on an elder board. Wouldn’t it be nice to know you at least have the costs of warming and cooling the church covered by the interest from an endowment?
Yet, for the very same reasons I wonder about the real benefit and cost of an endowment. Particularly coming off of the past decade, can I really be sure that the returns on the investment of the endowment are going to keep up with the necessary outflows, inflation and expenses? It’s very easy for me to open the paper and read about another unfunded pension liability. The same thing can happen if the leadership of the endowment is not fiscally minded regarding the necessity to keep the endowment’s principal stable and growing.
I also see the effect that endowments have on some organizations. When the organization is dependent on monthly gifts then they are accountable to the givers. If another organization is better able to complete the mission of the first organization, shouldn’t those who give direct their giving to the new organization? An endowment could prolong the existence of the first and possibly to the detriment of the second. Leaders or followers can abandon the original mission of an organization with or without an endowment. Just think about all the organizations that started off to promote one thing and decades later promote something very different. How many grandpas would be rolling over in their graves!
For me the jury is still out. Next time I want to look at the spiritual side of the question. What are the ramifications of an endowment on a body of believers? If it isn’t right for the body is it not right for the individual? Some of these questions we will address next time. In the mean time, what are your thoughts?