Nonprofit endowments help organizations create impact in their communities. And endowment reports, a follow-up to endowments themselves, are an essential part of the process. In this blog we’ll cover everything you need to know, including how to create an endowment report for your nonprofit.
What are nonprofit endowments?
An endowment for a nonprofit refers to a pool of permanent financial assets or funds that are invested with the intention of generating ongoing income to support the organization’s activities and mission. The income generated by the endowment is typically used to support the nonprofit’s operations, programs, initiatives, or other designated purposes — depending on the organization’s policies and donor agreements. It is a long-term investment strategy that aims to provide sustainable funding for the nonprofit’s operations, programs, and initiatives.
The organization’s board of directors or an investment committee typically manages nonprofit endowments. They oversee the investment strategy and decision-making process. The goal is to achieve a balance between preserving the principal and generating income or returns through a diversified investment portfolio.
What are the different types of nonprofit endowments?
Nonprofit organizations can have different types of endowments based on various factors and donor preferences.
However, there are some common types of endowments that nonprofits may establish:
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Restricted endowment
Restricted endowmentSome donors may provide contributions with specific restrictions on their use, such as supporting a particular cause, geographical area, or population group. These restricted endowments are managed separately, and the income generated is used in accordance with the donor’s restrictions and the nonprofit’s mission.
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Term endowment
Term endowmentA term endowment, also known as a term-limited endowment, is a type of endowment established by a nonprofit organization where the principal amount is invested for a specific period or term. Unlike traditional permanent endowments, a term endowment has a predetermined expiration date or event after which the principal can be spent
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Unrestricted endowment
Unrestricted endowmentUnrestricted endowments offer flexibility to the nonprofit organization as the income generated from these funds can be used for any purpose determined by the organization’s leadership. This provides discretion in allocating resources based on changing needs and priorities.
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Quasi endowment
A quasi endowment is often established by the nonprofit and can be used however the organization deems appropriate.
It’s important to note that establishing different types of endowments depends on each nonprofit organization’s specific goals, programs, and strategic objectives.
What kinds of nonprofits use endowments?
A wide range of nonprofit organizations utilize endowments to support their mission and ensure long-term sustainability. However, there are a few kinds of nonprofits that typically use endowments:
Academic institutions: Universities, colleges, private schools, and other educational institutions often rely on endowments for scholarship funds, academic programs, student financial aid, and operating expenses.
Cultural and arts organizations: Museums, theaters, orchestras, art galleries, and cultural institutions frequently establish endowments to support exhibitions, performances, acquisitions of artwork, educational outreach, and the overall sustainability of their operating costs.
Healthcare and medical research organizations: Hospitals, medical research institutions, and healthcare foundations often establish endowments to support medical research, clinical trials, patient care programs, and the advancement of healthcare services.
Social Service Organizations: Nonprofits in the social service sector, such as those addressing poverty, homelessness, domestic violence, or community development, may create endowments to secure long-term funding for their programs, advocacy efforts, and capacity building.
Environmental organizations: Nonprofits focused on environmental conservation, sustainability, and protection of natural resources often establish endowments to support initiatives such as wildlife preservation, ecological research, environmental education, and conservation projects.
Religious institutions: Churches, religious organizations, and religiously affiliated nonprofits may utilize endowments to support religious programs, community outreach, charitable activities, and the maintenance of religious facilities.
Nonprofit endowment reports
What is a nonprofit endowment report?
A nonprofit endowment report is a document or publication that provides an overview and detailed information about the organization’s endowment funds. It serves as a means of communication and transparency to inform stakeholders, including donors, board members, and the general public, about the status, performance, and impact of the nonprofit’s endowment.
Plus, nonprofits with endowments are typically required to follow legal and regulatory guidelines regarding the management and reporting of these funds. Transparency and accountability are essential, and organizations often have reporting obligations to demonstrate how the endowment is being managed and utilized.
Need help writing your report? Use a report template to help you get started →
Why are endowment reports important?
Nonprofit endowment reports are important for several reasons:
Transparency and accountability: Endowment reports provide transparency by sharing information about the organization’s source of funding, including their financial performance, investment strategies, and utilization of funds. This transparency promotes accountability and helps build trust with stakeholders, such as donors, board members, and the general public.
Donor stewardship: Endowment reports serve as a tool for donor stewardship. They allow nonprofits to communicate with donors who have contributed to the endowment, providing updates on the impact of their contributions and expressing gratitude for their support. These reports can help maintain and strengthen donor relationships, encouraging continued engagement and potential future contributions.
Impact demonstration: Endowment reports enable nonprofits to demonstrate the impact of their endowment funds. By highlighting how the generosity of donors has been utilized to support programs, initiatives, and the overall mission of the organization, nonprofits can showcase the tangible outcomes and benefits that result from donors’ contributions.
Financial management and planning: Endowment reports help nonprofit organizations assess and monitor the financial health of their endowment funds. By analyzing investment returns, market performance, and other financial indicators, nonprofits can make informed decisions about their investment strategies, risk management, and long-term financial planning.
Governance and compliance: Endowment reports provide a means to communicate the governance and oversight of the endowment funds. This includes highlighting the roles and responsibilities of the board of directors or investment committee in managing the endowment, ensuring compliance with legal and ethical standards, and demonstrating good governance practices.
Overall, nonprofit endowment reports play a vital role in fostering transparency, accountability, and donor stewardship while showcasing endowment funds’ impact and financial management. They contribute to the nonprofit’s credibility, donor confidence, and the organization’s overall sustainability.
How to write an endowment report
To create an endowment report — either for individual donors or your community — it’s helpful to use a nonprofit report builder. With templates, drag-and-drop editing, and more, nonprofits can create any kind of report (including impact reports and annual reports), with ease.
When creating your report, it’s important to include:
Introduction message: The report often begins with a letter or message from the organization’s leadership, expressing gratitude to donors and highlighting the importance of the endowment in supporting the organization’s mission and programs. Sometimes, they even note a specific theme.
Overview of the endowment: This section provides an overview of the purpose and significance of the endowment, including its objectives, goals, and the role it plays in the nonprofit’s long-term financial sustainability.
Financial performance: The report includes information on the financial performance of the endowment, such as the market value of the fund, investment returns or income generated, and any changes in the principal amount. It may also include:
- Charts
- Graphs
- Other visuals data like maps
Investment strategy: Details about the organization’s investment strategy for the endowment are often included. This may cover asset allocation, investment policies, risk management, and any changes or updates to the investment approach.
Impact and utilization of gifts: The report highlights how the income or returns generated by the philanthropic gifts have been utilized to support the organization’s programs, initiatives, and overall mission.
- Photos of beneficiaries, volunteers, or staff
- Impact stories
- Social media posts relevant to impact
- Videos
Stewardship and governance: Information on the governance structure and oversight of the endowment is typically included. This may involve highlighting the board of directors or investment committee’s roles and responsibilities in managing and protecting the endowment funds.
Donor recognition: Nonprofit endowment reports often include sections acknowledging and recognizing donors who have contributed to the endowment. This may include:
- Lists of individual donors
- Donor profiles
- Impact stories or testimonials that highlight donor generosity and impact
Calls-to-action: Great nonprofit endowment reports always include a few essential CTAs like donate buttons, social media follow buttons, and even more general contact information.
The content and format of nonprofit endowment reports may vary depending on the organization’s preferences, reporting requirements, and the audience they are intended for. These reports provide transparency, accountability, and stewardship in the management of endowment funds and demonstrate the organization’s commitment to responsible financial management.
Nonprofit endowment report best practices
To make your nonprofit endowment report really stand out, it’s important to follow a few best practices:
Use brand colors and fonts: Endowment reports can be a great marketing tool. In order to establish your organization’s identity, utilize brand colors and fonts.
Use visual storytelling: In order to keep readers interested in your report, use visual elements where possible, including photos, videos, infographics, and more.
Personalize it: Using software like Yearly Precision, nonprofits can tailor their reports to speak to specific donors or communities in their reports. By personalizing the reporting, donors will feel more connected and interested in your organization.
Be clear and concise: A lot of information goes into an endowment report. When creating yours, be sure to keep it as clear and succinct as possible in order to keep readers engaged.
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By using Yearly Precision, nonprofits can create personalized endowment reports using templates, drag-and-drop editing, and more.
To get started, sign up for free with Yearly →
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