The situation with COVID-19 changes day-by-day and hour-by-hour. Hopefully by now, nonprofits have taken steps to allow all but absolutely essential personnel to work from home. Fundraising, while essential, is a function that can be done from a home office. The big question is:

How can we keep our donors connected to our organizations in this unstable environment?

When it became clear that I would not be allowed to travel anymore for work, I fell back on a maxim I heard somewhere early in my fundraising career. It rhymes so that’s convenient and an aid to memory.

Near
Dear
Clear

In any circumstances where rapid change is taking place, we must take great pains to keep our donors near, dear, and clear. What does that mean as a guide to practical action and how can we all undertake those functions while protecting ourselves and our donors from coronavirus?

Let’s take each part of the maxim in turn:

Make sure your organization is crystal clear on its priorities. The first of which should be the health, safety, and welfare of those they serve and those who work for the institution. Repeat this often to your constituents.

However, do not shy away from honestly telling donors how this crisis is affecting your organizational needs and its finances. Your major donors and board members especially deserve the candid talk about what is needed, what might be needed, and why.

Did you find the framework of near, dear and clear helpful in thinking about how you are keeping donors connected these days? What other strategies have you tried in the last couple of weeks that keep donors near, dear, and clear? Tell me below in the comments!

Again, I hope this was helpful to you. If it was, please leave me a comment below.

Also, if you found this very helpful, I hope you’ll subscribe. By doing so, you’ll get my FUNdraising Friday emails every Friday with pick-me-ups, helpful articles, and cool freebies. Humor and a commitment to continual learning will no-doubt help us all through this crisis.

Take care and be well,

Jessica ​

PS - If you are feeling stressed and anxious and burnt out due to coronavirus, you're not alone. Because so many are facing unprecedented challenges and pressure right now, I'm hosting a free webinar on the topic of Self Care for Non-Profit Professionals. It will take place April 1st. Register today as there are only 100 spots!

Ok, I’ve got one final category of tips for those parents out there who are navigating the un-charted waters of having their kids home all day for the whole workweek. You're probably thinking "How do I get them to do their work? How can I get all my work done too?"

First, let’s be clear: this is a highly unusual situation for everyone. Remember how we need to give everyone grace. That includes kids. They absorb all the unspoken worry and fear around them, and it can cause them to act…. less than pleasant and cooperative. Be kind and give them some leeway.

That said, I would not let extreme cases of defiance and disrespect slide. Otherwise, you are setting some precedence that will cause you trouble later, especially if this situation persists for months and not weeks.

Sound like contradictory advice? I’ll cop to that. That’s what parenting is: finding a balance amidst the many paradoxes of raising little humans.

On to the specific tips:

• Time: Don’t think you have to “homeschool” all day. Working one-on-one, kids get done the same amount of work in a few hours, assuming they are cooperative. They will get done more in less time, just like you will.
• Read to them. Read one chapter in Harry Potter per night or two picture books. It’s that simple and it helps that much.
• LEGOS: hours and hours of thoughtful educational free play. If you are at Walmart getting groceries, you can get a pretty hefty basic set for $25.
• Notebooks: one large blank book notebook or journal per child will save your sanity from loose sheets of drawing paper EVERYWHERE. Turn them loose with a notebook and crayons.
• Set time for “free screens” where they can watch what they want but at other times give them a short list of choices.
• Where possible, go for walks and get exercise. You’ll need it being home all day and so will they. Listen to the birds. Teach them the names of flowers and trees. Examine fallen bird’s nests. That stuff is as important as the fresh air and exercise.
• If you cannot go outside, exercise in the house. Family dance party is always a hit. Basic calisthenics, they’ll imitate whatever you do.
• Introduce foreign language studies. Find Little Pim videos (YouTube has some introductory content for several languages) or download DuoLingo on a phone or tablet. Short of that, look up some words and make some flash cards.
• Sign Language: Signing Time is amazing and so fun! She has a good number of free resources on YouTube to get you started. Rachel and the Treeschoolers is another of her shows.
• Cosmic Kids Yoga adventures and Zen Den videos. Hard to explain just how magical and awesome these are. Try and you’ll see. I hope this lady is a millionaire. She’s got lots of yoga and meditation videos for kids on YouTube. My kids LOVE them because they are based on their favorite Disney stories or are fun stories about animals.
• I’ve been seeing a big list of free homeschool resources going around. As a former homeschool mama, from that list, I can personally endorse Mystery Science (amazing), PBS kids, Khan Academy (for math) and Typing Club. We spent a ton of time trying out different resources and discarding others. So that’ll save you some time.
• I’ll also offer that Outschool offers amazing classes and many are very affordable ($10-15).
• My favorite YouTube Channel is Art 4 Kids Hub. It’s a dad who draws with his kids and they are completely charming and engagement. They draw all the favorite characters and make it very attainable for the kids.
• Family Game Night (card games, board games)
• Family Movie Night: popcorn and something more classic they wouldn’t otherwise watch, like Singin’ in the Rain.
• We always did school in the mornings because my daughter was a morning person (I’m not). We would start with 10 minutes or so of Circle Time which just includes a few songs, dances and stretches. It’s a beautiful way to anchor their day and connect with them before turning to your work. And in this time of uncertainty, they need that. I have a tons of Circle Time playlists on Spotify if anyone is interested.
• After Circle Time, my daughter would do whatever book work or online work she needed to do that day. Depending on attitude levels and cooperation, she’d usually be done by lunch and then she could just play or draw the rest of the day.
• If you have a partner, switch out kid duties so you can work. Have one spouse take mornings and then other afternoons, making adjusting for meetings. If they are all over 5 years old, they don’t need direct supervision, so you can both hop on a meeting or call at the same time. LEGOs and Netflix will keep their attention, especially if you are limiting “free screen time”. I’m telling you; they will be so excited to watch whatever they want for a while; they will leave you alone.
• If there’s interest, I can also put together a list of our favorite educational shows on Netflix, Hulu, and Amazon Prime Video.
• End the day loving on those kids. Read to them and tuck them into bed. They need the unconditional love of their parents right now. They need to know they are safe and secure.

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Again, I hope this was helpful you. If it was, please leave me a comment below. If you found this very helpful, I hope you’ll subscribe. By doing so, you’ll get my FUNdraising Friday emails every Friday with pick-me-ups, helpful articles and cool freebies.

At the end of this, I’d like to say again that I know how lucky I am to have the kind of job I have that allows me to work from home, especially at a time like this. So many don’t have this opportunity. Cultivating gratitude will help us all build resilience for this challenge.

Take care and be well,

Jessica 

If you weren’t a finance major (I wasn’t), learning the ins and outs of endowments can be intimidating.

But fear not! Endowments are easy to understand once you know some basic terminology. 

Becoming proficient with these terms is essential if you want to grow a career in fundraising. Being able to converse intelligently about endowment issues is a must for nearly all development professionals. Luckily, I worked with three phenomenal CPAs at my last job and I owe those ladies a lot, because through their patience I learned this essential information well enough to utilize it in my fundraising and to teach it to you here! 

I find that it’s helpful to explain things in terms of a household budget so I’ll give the standard explanations and then I’ll give my liberal arts definition. 

What is an endowment anyway?

First off, the main idea of an endowment is like a savings account where you never ever touch the original amount you put into the fund. Imagine you won the lottery and took the lump sum option and after buying a house and some cars and taking a big vacation, you put the remaining money into a savings account. You decide not to touch it and live off some of the investment earnings. That’s all an endowment is! 

The original amount that you put into the account goes by several names in the nonprofit world: corpus, principal, or the permanently restricted part of the endowment. I tend to use corpus most often. 

Surely it’s not that simple? 

You’re right! It’s not. 

As we all know earnings in the investment world are neither guaranteed nor constant. Thus, if you want to maintain your originally invested amount in perpetuity (that’s accountant-speak for forever), you’ll need to be careful with how much you spend year to year. 

Let’s say that the market averages 8%. You would not want to spend all 8% of your earnings that year, because next year you could earn only 3% or *gasp* have a negative return. 

This is why most nonprofits put a cap on the amount of the earnings that can be spent, often only 4 or 5%. That’s called the spending allocation. (This could be for scholarships or program support, anything that the donor and the organization wishes to fund. What the spending allocation gets used for is governed by a written agreement between the organization and the donor. I call it a fund agreement but other groups use different names for the same document.) 

Anyhow, the spending allocation is the  portion of the annual investment earnings authorized to be spent on the mission of the endowed fund. (One endowment can have many endowed fund under its umbrella. Think different scholarships or faculty support funds in a higher education context.) 

In the metaphor of you winning the lottery and putting a large lump sum in an investment account to live off of, you might earn 8% but you’ll only spend 5%. So if your lump sum was $10,000,000, you’ll need to find a way to live off of $500,000 annually rather than $800,000.

What happens to the earnings not spent?

There are generally 3 things that can happen to earnings not spent. 

1. Those earnings are held in the temporarily restricted part of the fund. Think of each endowed fund as having two distinct but inseparable parts. Each part has different rules but are invested the same way. One side is the corpus which is supposed to be sacrosanct and never spent (permanently restricted). The other side (temporarily restricted) is also called reserved earnings and that’s what it does, it reserves some earnings in case of market downturn (a year where you don’t earn the full 5% or you have a negative return). In the household concept, you make $800,000 on your $10 million invested, and then you decide to live off of only $500,000, socking the remaining $300,000 away for years when you might make less than 8%. Make sense? 
   
2. If a fund has had a string of bad years and the total market value of the fund (amount in permanently restricted and the amount in the temporarily restricted) is less than the original value of the corpus, that’s a situation called underwater. That’s bad. Almost all of the time, when a fund is underwater, there is no spending allocation. Once the market rebounds, spending allocations can resume and any additional earnings can go to replenish the value of the permanently restricted side. In our metaphor, let’s say that you’d had a bad investment manager or just plain bad luck and now your total value is $9,500,000, instead of $10 million. Well this is the exact situation you wanted to avoid because you’ve dipped into your corpus. This year though, you made 7% ($665,000) so you can choose to live off of 4% ($380,000) and take the remaining earnings ($285,000) and replenish the corpus of the fund somewhat getting you back to $9,785,000, much closer to your corpus of $10 million. 
3. Some endowments and the organizations that manage the funds take an administrative fee. This fee may go to the investment managers or sometimes to the budget of the nonprofit who the endowment is to benefit. Usually this fee is small 1-3%.  

Each organization will have an investment policy for its endowment and a target investment earnings that they hope to reach. You can see why: if you need 5% for the spending allocation, 2% for the administrative fee(s), and some to hold in reserved earnings for a rainy day (or a bear market year), suddenly your endowment needs to clear 8-10% every year for everything to remain viable and run smoothly.

Now here’s a mind bender for you: if a fund earns some returns but not all the way to your target and the total market value is over the corpus amount, you can’t give it a full spending allocation. That’s called underfunded. (Not to be confused with underwater, but seriously how could you not confuse them. This took me YEARS to figure out completely.)

Here’s the analogy: Your $10 million is still intact and you’ve banked another $100,000 in reserved earnings, you earn only earn 3%. Remember your usual allocation is $500,000. So, you made $300,000 and you have $100,000 extra without touching your original investment, but that’s only $400,000. Guess you better stock up on ramen until next year! And furthermore, it’s likely that as a good manager you wouldn’t want to wipe out your entire reserved earnings lest the situation of lower than expected earnings continue for another year. So, you might only allocate $200,000 be spent this year, leaving $200,000 in reserved earnings. That’s an underfunded endowment. 

Whew! Now my brain hurts. Let’s talk about something else. I hear about divestment. What’s that?

Many organizations with long standing endowments managed their investment only for strong returns and with little regard to the greater social good. This means some prominent endowments are invested in things such as fossil fuel companies or private prisons or other things that are actually at odds with the organization's mission in some cases. 

For instance, if you were an animal lover, and you hear from your financial planner that a significant portion of your $10 million nest egg was invested in cosmetic companies that cruelly test on animals but you’ve been making phenomenal returns. What would you do? If you told them to move to other companies that are cruelty free but to do it in a way that hopefully preserved returns, that’s divesting from companies profiting from animal cruelty. 

Conscious Investment 

Some organizations are so committed to their mission and values that they do not want their endowments to be utilized in ways that are contrary to their values as an organization. These groups can decide to invest in what are sometimes called ESG or environmental, social and good governance funds, ensuring that organizational monies are not used to exploit people’s labor, trample their rights, damage the environment, or other things that are negative. In some cases, ESG funds can be invested in companies that are not doing things the right way as part of a strategy of putting pressure on the companies as investors. This has been done successfully to influence labor disputes and to support the growth of clean technology divisions at fossil fuels companies, for example. 

Constituents including donors, program recipients, the general public, students (in the education field) can lobby and put pressure on governing boards of non profits to divest from certain areas which they feel are in conflict with the values of the organization. Leadership can also chose to divest as part of a vision for the future of the organization. 

How can I use this information as a fundraiser?

I’m going to cover that in an upcoming post “Fundraising and Endowments”. Stay tuned by subscribing. You’ll receive my FUNdraising Friday emails where I bring you curated information and super cool freebies exclusively for my subscribers. 

Do you find endowment-talk intimidating? Did this post help to demystify it somewhat? What questions do you have for me to answer in my upcoming "Fundraising and Endowments" post? Comment below and let me know!
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Comments and questions are, as always, welcomed and encouraged!

Cheers,

Jessica Cloud

PS – If you liked this post, you might also like these:

• Culture of Philanthropy Check-Up
• Major Gift Travel Tips (Interview)
• What should your strategic plan contain?
• How to Build Rapport with Prospects and Donors
• Benchmarking: The Missing Piece of Your Planning Process

PPS - If you found this article helpful, please comment and let me know. Also subscribe to Real Deal Fundraising so you don't miss a post! You’ll start to receive my FUNdraising Friday emails where I bring you curated information and super cool freebies exclusively for my subscribers!​​ And don't forget to visit my store for transformative training and consulting products!